10 Reasons why you need the Trifecta! The Perfect Legal Structure

[Music] welcome everybody to this week's episode of the main street business podcast with yours truly mark kohler and my amazing co-host matt sorensen aka the birthday boy yeah that's right baby we're 41. yeah 41 years old young however you want to look at it i guess wow that was a little bold to claim yourself young at 41. yeah you know you know you're old when you refer to yourself in years young yeah corey do you think let me ask corey corey is 41 young no corey says you're over the hill that's a millennial just giving you a shot of reality i think i need like an aarp membership before i can refer to myself in years young oh what's happening to me yeah um no great uh happy birthday birthday weekend saw mark come down uh my girlfriend put together a cool uh birthday little party of sorts so uh mark got me a cowboy hat do you call it a cowboy hat or just a hat like do cowboys call it cowboy hats or they just call it a hat well i think they call it a cowboy hat cause see farmers farmers are more of a trucker hat john deere yeah but ranchers it probably just hat but for us we need to death we i think we need to be definitive it was a john dutton yellowstone felt brown cowboy hat and made me you look good and i got a belt buckle too so there's a little theme going with it mark wants to you know make me a real man cowboy he like you know you gotta be a little more tough i guess so yeah when in rome so well happy birthday mr sorensen thank you so okay well today's episode uh for those that have not listened to our podcast before welcome we try to give a tax and legal tip uh each week we were going to do the open forum today we had a lot of questions in the hopper we will still address those next week but we felt we needed to cover the trifecta this is a big deal and we've had some requests to say can you explain the trifecta i don't have a youtube video on it i'm going to write an article tonight on it i got it i gotta knock it out so but this is every attorney that comes to our office literally is a brand new associate and even our paralegals we train them on the trifecta yeah it's a big deal and this is really the the brainchild of mark kohler i mean it really was uh like and it's it's a it's simple and uh but it's also the most effective way for even the most complex client we would we would face on how to separate out tax planning asset protection planning knowing what goes where how it coordinates together um and it's there's just they're really planning you forgot the trifecta you said tax planning asset protection and then family in a state there you go you know so because you ain't gonna live forever so this thing will need to carry on look at that matt pulled an ain't ain't gonna see you look at you get a cowboy hat within seven days you're throwing down ain't gonna live forever yeah see it's already had an effect on you oh shucks oh man well okay i reckon i'll be saying that one too reckon yeah how are your crops doing i reckon pretty pretty good i don't know i think i think of ryan hamilton if any of you have not seen the netflix special this is your homework everybody this week there's a netflix stand-up comedy special called happy face and it's ryan hamilton ryan hamilton think of the play hamilton that's taking the country by storm for the last three to five years but ryan hamilton he's from idaho and now living in new york and he talks about the juxtaposed relationship difference between the two so funny um so i'd really recommend all of you get over uh and watch that netflix special it's really really fun okay so if you haven't been on our show before we really really want to help you build wealth save taxes protect it leave it plan it we're the lovers of the legal community not the fighters we're there to protect you and make it work i really really love my job and i know matt does and so we've had two new attorneys join our firm this last month and it's been emotional for them because they're like this is so fun this is what i dreamed of doing as a lawyer is actually helping people plan their future and they've left the litigation world and they love it so yeah no one wants to fight battles and even when you win a lawsuit you still really feel like you lost it's such a pain so but this is the time and i think as we go through this to to kind of sit back and look at your own business your own assets and also for those planning out you know you're making some business plans yourself you want to get some rental properties you want to grow your wealth you want to plan for your future like this is how to bring it all together okay trifecta now i've got a little tax tip i don't know if i have a legal tip today but i'm going to just throw it on quick tax tip but sometimes have a guitar riff before the tax tip i don't know why we got rid of that i kind of liked it you thought it was cheesy didn't you it was a little cheesy but okay well just i'm a team player if my partner's out all on all in i'm not gonna do it so okay i'll go like a wow now okay so no guitar riff here's my tax tip a lot of people have been asking me this and that is why did justin bieber cancel this tour stop this july in vegas no that's not what he's been asking okay everybody's been asking is joe biden in his tax plan what's going to happen what's coming down the pipe well it actually was a breath of fresh air this week about three weeks ago president biden and his team i guess for lack of a better word kind of laid out their plans of what they want to pass in congress this year and that's kind of how politics work you got it they got to float it they got to let everybody kind of you know mull it over it's got to see if it gets some traction so they threw out some pretty aggressive uh tax hikes the greatest tax hikes or the biggest tax hikes since 1993. that's that's a big deal so um three weeks later now though what's been in the news this week which has been very refreshing is the senate democrats have said and especially the moderate democrats have said hey we get it you want we need to increase some taxes we're okay with that but we're going to be really careful here we're not going to overdo it we're going to be very targeted and there was several quotes from some senators we won't get into the minutia here um but the the big quote this week is there's no room for air and that was from the maryland senator that i forgot to say at the moment i apologize van hollen yeah ben holland and and i think that's good matt there's only 50 of them they need everyone to pass it with the vice president um uh voting so they can't lose one and and so yes that which is good news because hopefully it's gonna take some bipartisanship to get this done um if they do it and it's gonna not be what biden's gone out and asked for my biggest thing in the bill all this is was not just the tax hikes but that he wants to hire 87 000 irs agents to go to audits and there's a big belief amongst the biden's team that um and they're relying on some some studies that um there's a ton of tax fraud out there and people unfairly under reporting taxes particularly among high net worth individuals and that if they just go audit the heck out of them they'll create way more revenue than they spend in employing these 87 000 agents so yeah that was a a big push to i know it's part of the bill also yeah um i will i will just uh make one more comment on that particular note you have to take that with a grain of salt if i may say it that way because the accounting industry is got a huge demand and very little supply the big accounting firms our accounting firm all over the country they can't find enough workers i don't know where the irs is going to find 87 000 people that are qualified and it's gonna take them um two to three years to get those eighty seven thousand people functional and operational and so our goal has always been and we talked about on the show quite a bit is there's a happy medium we want to be aggressive but not create put a target on our back and i think far too many accountants are conservative in nature just that's the way they were born and raised but they don't they aren't aggressive enough and so i still think there's a lot of room for some quality tax planning and 87 000 agents if they even can find them and get them trained that doesn't bother me doesn't worry me my clients you're gonna be fine yeah we're about doing good tax planning and tax strategies that work on are legit so if you do get audited you're fine yeah um i i will say there are a lot of clients who are just sloppy they're taking the right deduction expenses they're just not keeping good records and their bookkeeping has been what i'm worried about for some clients but yeah sloppy sloppy joe sloppy dog that's an adam sandler uh saturday night live special he is the uh lunch lady oh he is so talented for those of you that think all right these snl characters are just you know potty humor actors uh adam's just really musically talented as is almost as much as his acting skills just like jack black i mean those guys can play the guitar and hit their notes and even though it's comical in nature i want to get hats off you know that's that's it that's the toughest tip of the hat tip of the handler there you go adam text me later and to give me i gave you a shout out adam you can text me later and you're welcome okay legal tip anything good what'd you come across this week anything good just a quick legal tip something to keep a lawsuit or something uh it's an ira tip but it's a it's a law oh there's so that's a legal tip sounds like a stretch to me but all right okay well you know this is one i i run into quite a bit is there's a misconception about moving retirement accounts and i'm going to give you two quick ones that are kind of cause problems that are kind of out there but one roth ira let me just make this tip this is good roth iras are forever roth iras once you go roth ira you can't go back once you start a roth ira it's always a roth ira can i change it to a traditional ra absolutely not can i recharacterize my roth ira conversion can't do that anymore can i move my roth ira to a roth 401k i have a solo 401k i want to move my roth ira to my roster okay nope roth ira and the funds in them are always roth iras now you can go roth 401k to a roth ira but once it's in a roth ira it's stuck now roth iras are awesome so don't stress but i see a lot of clients particularly clients with solo 401ks that may have a roth ira try to move their roth ira into the roth solo 401k and it's like you can't do it it's just not allowed so there's a little legal tip on the you know my favorite account the roth ira yeah and it would always be a roth ira can i add one amendment senator from arizona yes without objection thank you okay uh i would uh just i had a really great call uh yesterday with a uh i don't want to say his name because he is a youtube influencer and he's out there and he will probably do some collaboration down the road but um what was interesting and i think some of you listening here may be facing the same quandary and he's had some success the last couple years and he's like mark where do i put my money i can't get a straight answer from anyone and i said well i'm not a financial advisor but i can tell you what my successful clients are doing what i'm doing and just take that for what it's worth and do your research and make an educated decision on your own um and what's nice about that is clients appreciate that perspective because i'm not selling anything i'm not selling a product and so they can say okay that's fair you know there was no hidden agenda but what we got to yesterday is like well what should i fund first and this is a very successful person he goes i just can't seem to get a straight answer anywhere and i said if there's two things you fund first before anything else put your money in your roth every year max it out whatever and why make too much money nope you can do the back door roth i even sent him my video on it he's like oh my gosh no one ever told me this and then and then i said let's get some fees paid to your kids for helping you in your side hustle or small business fund their roth and any contributions can come out tax-free for college with no penalty and then number two fund your health savings account so i want everybody in your family to have a roth and everybody to have an hsa health savings account now there's some tricks and we've done shows specifically dedicated to those two topics but when matt says once you have a roth you can't get out of it and he said that's not a bad thing like matt said that's a good thing and i want every client of mine to have roth i have a roth matt has a roth and you can have a day job with a 401k and still have a roth so there's ways to do this and i hope that many of you that are trying to figure out where to deploy your money you start with those two vehicles now what we put in the back seat discussion for another show i gave him some thoughts on what i'd invest in uh or what i see my clients doing but another show okay okay all right the tri tractor yes not to be confused with the tablet uh what's the pen tablet well my sonny boy uh the pentavert it's well known now i've got to do this in a scottish accent i don't know if i can do mike myers justice here the tablet is a well-known organization run by the most wealthy five five most rich most scottish accent i need freud wires where is he they meet triangle at the secret mentioned in colorado known as dub meadows and uh that's the penn tablet the five most wealthiest people in the world who are those people well i think it's the queen the vatican the rothschilds the gettys and colonel sanders before even tits up so uh anyway so if you if you haven't seen someone so i'm married yeah okay yeah so american expert yeah it's a classic 1990s classic uh and uh i made my millennial kids watch it the other night and they're like that wasn't too bad i'm like you're right your dad has good taste so yeah anyway that was the impetus for mike myers using that voice for shrek because his wife his wife said he'd get in the bathtub and start talking scottish yeah i want some haggis make me some haggis woman and then he came up with the the ogre the olga and shrek so so i married expert was the impetus for shrek all right okay so here's the the trifecta now why don't you describe it well i thought let's do a little pictionary here okay now trifecta meaning three parts okay all right now the first thing to realize if you're looking on a piece of paper or just you want to sketch one out for yourself is draw a line down the middle okay and we got left side right side and we're going to talk about what stuff you put on the left side versus stuff that goes on the right side and there's a tax and asset protection reason on why we're going to put stuff in one place to the other okay now let me say can you say all right for those watching and for listening you can watch this on youtube so just go type trifecta in youtube and put sorensen or kohler in there and it'll help narrow it down if there's other trifectas out there i don't know but yeah to me there's no other trifecta than this but um for those listening on the podcast don't stress you can watch this on youtube and but i'm going to we're going to describe it as visually as best possible okay keep going so we're going to line down yeah you can think through it conceptually as we're describing it here just on even on audio so okay okay so we got the line down the middle you and now you've got a left side and a right side we're gonna put different things on each side here in a moment but underneath it all is your trust okay this is your estate plan your trust your revocable living trust is gonna own all this stuff on top whether it's on the left side or whether it's on the right side okay got it so there's a box that's a box at the bottom so you think of it like a bucket at the bottom or a box with a line at the very top of the box in the middle going straight up the paper okay all right there you go now if you don't have a trust this is just you personally just draw yourself a cute little stick figure you know and uh and it's you and maybe you and you know you add in the trust later you know it is estate planning special right now at kqs lawyers where you can get a few hundred bucks off your estate plan we get to a whole trust powers of attorney living will you know kind of the pull the plug document um will all that stuff all included 300 bucks off our regular pricing for that uh good for like another couple weeks yep 10 days okay we do it once a year it's our 11th year in running and so i'd like to think of water flows downhill money and ownership flows downhill and you need a foundation before you build a house before you build a building before you build your empire everybody wants to build an empire large or smaller and you want to leave a legacy and you want your own little empire and so the foundation is critical to get going as soon as possible now we're going to talk about the benefits of the trifecta in a moment and how we're going to use this trust strategically but if you're watching on youtube i put a second little smaller box of equal width below revocable living trust and put 1040. i also put a little small box below 1040 that says personal bank account because i want all of your investments and your whatever you're doing up above on this left side and right side that matt's going to describe to flow downhill i want to let when you're ready to buy underwear and groceries it comes out of your personal bank account and all the money you're making up above flows down through your trust onto your 1040 into your personal bank account okay that's the foundation okay all right matt all right now let's distinguish between the left and right side okay on your left side we're going to call that operations what type of income is that okay that's going to be ordinary income right all right so this is ordinary income so we think of operations think of a business you know maybe you're a service business or you sell goods you're getting a 1099 for drive and uber um you have a uh you know you have multiple businesses over here whatever yeah or your w-2 let's think of this as your money you're making every day to cover the nut whatever that monthly nut is how do you pay the bills and we're going to divide this left side into some sub-p sub-areas but really we're making money to pay the bills that's the lesson we're making money to invest money yeah and i you know and i had a well i'll come back to this i would get a good question the client raised about the trifecta okay so okay now on the right side okay we have assets and this could be sometimes called passive income over here okay love it and now the let me say a couple reasons why we're trying to distinguish between the two first assets we want to have asset protection right we want to keep our assets separate from our operations because if i have operational businesses um let's say i'm a contractor all right um with a lot of contractors doing well right now you know yeah and you know some goes wrong on a job you get sued you don't want to be holding that all of your assets in the same company that you do your operations so we want to separate these two things out so we're going to push assets maybe your rentals or other stuff over here on the asset side okay now for those that are driving down the road or on a treadmill i have just over emphasized this line in the middle of the paper and just colored it in it's like pictionary i'm just over emphasizing and molding this line because this is a wall we want to treat this like a wall i want to keep assets on the right and i'm putting a little arrow pointing to the right and an operations on the left i don't want to set up an llc to own my rental and also run my construction company or my realtor business i don't want the restaurant to be in the same entity as the building itself i want separation yep okay now okay so yeah and it goes from there that's it that's the basic perfecta operations assets holdings yep and and assets could be a brokerage account uh in your personal name it could be it's gonna be your retirement accounts are over here too okay we're gonna have a little uh area here on the right side for your retirement accounts and hsa like mark talked about so um but there's another reason it's not just the asset protection nature of it okay hold it okay so about what you said let's focus on that for a minute the number one well i don't know number one reason there's a number of reasons to honor and respect the trifecta number one i'm not saying is the greatest but it's we're gonna go through this list so i'm gonna put this down below number one reason for the trifecta is asset protection okay do you want to say anything more about asset protection before we go on to reason number two yeah bottom line on asset protection keep your assets separate from places that can create liabilities that is what asset protection is all about how do i keep my assets in a place where if i get a liability no one can get over here that's what we're doing you keep this line here do not connect them the only way that these assets are connected to your operations is that underneath the trifecta here you happen to be the underlying owner but that's not going to cause your assets to be subject to a lawsuit from something you're doing on operations so and i want to add to that asset protection comment by saying this a revocable living trust does not give asset protection oh or there's some good reasons for a trust and why it's part of the trifecta which we'll come to but one of them is not asset protection in fact asset protection is on the left and right side for example i'm going to put a little circle here on the left yeah that we're going to come to in a minute but this might be my inc i'll just call it inc s corp llc types is an s corp whatever um this little company has a veil around it too so that if i'm out operating i've got a veil of protection there's an entity there and then on the right side i might have an entity to hold an asset and that'll have a llc for example to hold an asset but they're owned by the trust but the trust itself does not create asset protection so i want to create provide that distinction okay okay mr sorenson okay do we want to get into the second reason not an order of importance again you know i don't even know what you're going to say i don't want asset protection and tax planning to feel like well you know better than the other okay so you're gonna go taxes do you just set it is that number two yeah okay taxes okay why do we need to try effect for taxes your operational income is taxed differently than your asset income or your passive income there's different strategies and reasons you're going to run things through different types of entities so if you're being sloppy and lazy not respecting the trifecta yeah and you're you're running operational income let's say the contractor example again and do the same entity that owns a rental property well not only have you done crappy um asset protection planning you've also kind of cut yourself short on your tax planning you're going to be overpaying on taxes by not treating those things differently and running them through the right lane yeah now some of you accounts out there like well in my s corp on the k1 i can distinguish passive income from ordinary income or income subject to self-employment tax i can still distinguish that in my entity that might be doing operations and holdings yes that's true but you've also muddied the waters because now we have audit protection issues which i think go hand in hand with taxes because if you're going to put all of your operations and holdings through the same entity even with some tricky or more complex bookkeeping you could separate them fair enough but now if you get audited they're looking at everything you're opening up your whole kimono where 90 of audits are very targeted they're looking at one entity well by separating my tax planning into two sides i've also separated the audit exposure also a 1031 exchange is much more complex in an s corporation if not difficult or impossible where i could do a 1031 exchange in a more creative format with an llc on the right side i don't want building gains i don't want to face the utilities doctrine general utilities doctrine i'm talking to you accountants out there now some of you are like what the crap is mark talking about i'm talking techie for my accountants out there because they may go well matt i can put them all in the same entity sure but you've just created problems on building gains 1031 exchanges you've got more complex bookkeeping you've got auditrix risk all-in-one entity and i know you accountants are shaking your head going okay mark i get it so there's a lot of good tax reasons to separate yeah see we want to by doing this left and right side we want to use the right entity and structure as a tool for the specific thing it's built for right like the s corp is built for the small business that's selling goods or selling a service it's made for that the congress intended it for that the tax planning around it is built for that it works don't make it clunky by putting the rental property in it yeah that's what the llc is really built for it's made for that now yes you know like i mean there's lots of other tools you can use in your life for the wrong thing but it's not made for that it might get the job done but man it's gonna be harder people are gonna be like why the heck are you doing that you know so anybody that's worked on a in an auto body shop or on a farm knows the bfh that's the big freaking hammer and they're like bring the hammer over here bring me the bf and the hammer they try to use the hammer for everything and that it doesn't always work we don't want to just and this is where legalzoom which has done some good things in some ways they've done some bad things in that they like the llc is the one size fits all all you need is an llc you know just come here and set them up fast and easy and all of a sudden clients get into it and they're like well that the llc is nice but it's trying to use the hammer for everything and it and it doesn't work yeah okay can we stay with taxes for a minute yeah because i'm a geek i know taxes you know yeah you can't get away with that at a party or in any other place can you say that and someone would say oh yeah please yeah yeah well i hope some of you have an opportunity to get to youtube and uh it'll be a link in the show notes if you're able to get to youtube and watch some of my masterful artwork here but everybody focus on the left side for a moment that's the operational side now what i've done here is i've divided it into actually three sections that's actually been an evolution of my trifecta over the last couple years because what i've discovered is there's really three parts to operations there's the day job in column one and if you're married one of you might have a w-2 if you're single you might have a day job and in column 2 a side hustle a side hustle is kind of the gateway drug to full-time entrepreneurship some people pick up a side hustle because they can't make ends meet and then realize oh my gosh i'm really a small business owner i kind of like this and when covet hits you now make the side hustle your full-time occupation not out of choice but out of necessity and that's okay some people say well having a small business is risky i'm like haven't not having a small business is risky we should one in three americans now have a side hustle or more so some statistics show 40 or more of americans working americans have a side hustle that's a good thing so column one is day job column two is side hustle which could be a simple llc but column three is the full-time entrepreneur and and again if married one spouse may be the full-time entrepreneur while the other spouse is the day job so we've got those three columns feeding into our revocable living trust so i want your trust to own your s corp or own your llc side hustle because we want to tie it all together for other reasons that are coming in our list but tax planning is really three pieces on the operations side matt why don't you talk about tax planning on the asset side because i know there's a column over here that you really enjoy yeah yeah so on the asset side for many people the one of the biggest assets you're going to have over here on the asset side is your retirement account so this could be your day job 401k or spouses this could be your side hustle solo 401k or your full-time entrepreneur solo 401k for those of you who are self-employed with no other employees this could be your roth ira your hsa your kids account you know your spouse this could be covered else i mean lots of accounts are fitting over here and these are tax um favorable vehicles right you're getting tax deductions in them you're getting taxed uh no growth as they're growing and the roth accounts are coming out tax-free so there's all a bunch of tax planning and tax favoritism on building wealth in these accounts on your asset side okay and so what i did for those visually i took the right side and created two columns so there's a little mini line on the right side dividing that side into two subparts the first column is called tax free or before tax and that's all those little vehicles matt was talking about this is an area that every american is going to have by the time they retire they're going to at least have something over there now our goal is to make sure you have a lot of something but there's something so this is the tax for your before tax the second column on the right side is the after tax column and that's going to be money that we make in our day job or in our small business that we don't defer into a tax perform tax preferential vehicle and we might buy a rental property this is a little rental we own down the street or maybe that brokerage account or our little cryptocurrency account or just little investments that are making money that need their own little llc and so i've got a little circle here that says llc and i've got rentals i've got investments i've got farmland second homes airbnb because an airbnb is a great cash flowing vehicle that you get to benefit from and create cash flow from and wealth and that's a perfect fit over here on this second column on the right side okay matt what would you say you want anything you want to add to the tax reasons before we go to the fourth reason we like the uh on the tax reason what i'll say is another common asset that's gonna be on the asset side is gonna be your rental properties all right or maybe it's a personal brokerage account all right now those are passive assets we don't need to do too complex of planning in terms of an s corp or something like that these typically are going to flow through onto your personal return there's no company level tax there's not a payroll report you're doing you know they're typically flowing through onto your personal return and they're already tax tax less right rental income and your rental properties you know you're getting all these expenses on it you're getting depreciation there's capital gain income when you sell it same thing with your personal brokerage account you know you're getting dividend tax rates which are lower and you're getting not subject self-employment tax and you're getting capital gain income when you sell those so these things don't have self-employment tax involved in them which is one of the taxes we're trying to plan for and minimize over on the asset side yeah now let's review and i've got number one reason for the trifecta is asset protection number two is tax planning number three is audit protection and before i say number four i want to just throw out a quick thought i had a phone call two days ago with the client with some substantive assets i mean this was a 10 million dollar client now i have phone calls i had a phone call with a client on friday that was like college student it was a young couple just getting married what do we do and i brought up the trifecta 10 million dollar client i started with the trifecta and i started building this diagram with little on powerpoint on a zoom call which all of our attorneys will do in a consult with our clients and he said mark in all the law firms and accounts i've ever met with i have never seen someone diagram it out where it made sense i love this and he said can i get a copy of it and i said of course you're gonna get a copy that's what you're paying for and and can some of you believe that isn't that amazing matt i mean this just just having a vision a picture says a thousand words you know yeah so yeah it really does um you know i had an interesting question from a client who came to the self-directed ira summit i loved it when he explained what he came for he's like i came to kind of learn about you know doing roth ira for my kids maybe and he's like then i sat through and i heard about the trifecta and soul okays and all these other things he's like man i came i came in for the snacks like the roth ira for the kids and i left wanting the whole thanksgiving dinner i'd love that quote oh my gosh yeah it was good and um but this is a client that has quite a bit going on you know good good income lots of stuff moving around business assets you know and where you can really put it together and it can make sense but also you see the efficiency of it and you see the rationale behind it you see the asset protection tax planning we're talking about but one of the questions i got and i can't remember was from him or someone else but i had a question from someone that says how do i manage like where my money if i'm doing really good over here on my operations side how do i get stuff over to the asset side like what's the process oh my gosh how should i be planning that i love it matt do you know my number four that i was gonna say was right on this gosh okay i love you man they love you good partners we are we are oh my gosh i love you okay number four you may not think this is gonna answer your question but it is number four reason for the trifecta it defines our bookkeeping okay defines bookkeeping and bookkeeping is the heart of how money is moved around now i have a little example matt some people see the trifecta and they see oh my gosh i need an account for this i need an account for that my kids are gonna have bank accounts and i'm gonna have a bank account for the llc and a big oh my gosh mark you're making my life more complex and i go no no let's say you went home and said i am sick of all these chester drawers in my in my bedroom there's too much going on in here and you started to just try to organize your clothes on the floor you're like i don't want any chester drawers i i don't want all this furniture i'm not going to go to ikea screw it even though they have good swedish meatballs i love those ones i'm just going to go i'm just going to go throw everything on the floor and organize it how would it feel it'd be a nightmare right you wake up the next morning you're looking for socks you're looking for underwear where's my t-shirts where's my jeans bookkeeping are the chest of drawers of a bedroom the bookkeeping lets us know where all the money is and if i need to move my shirts over to this drawer or i need to move my socks over to that drawer i can do it and understand where they go bookkeeping actually sets you free you come into your bedroom and you're like oh my gosh i know where everything's at and with online baking and apps for chase bfa and wells fargo and many of the big banks out there you can go to your app and look at where all of your clothing is on one app where are all my accounts so if i need money on the right side i take a draw i just move money from the s corp operation account down to my personal account and then i move that personal account money up to fund a new llc or to make a contribution to my hsa or to go put money over into an investment account or to buy a new home or to buy an rv so that the the personal bank account is kind of this the transactional center where everything goes through that train station so all the money goes down and then it goes over and if you're making money on the right side and you need more operational money it goes down and then back up to operations we rarely want to move money from left to right without letting it take a pit stop at our personal account that's where we organize everything matt dots i love that i love the chest of drawers um i think that the the bank account thing and that's you know this is the the pushback some people may have because they're like i just want one llc and i'm just gonna jam everything through it okay how well are you gonna track the performance of your business like you're not gonna feel what's going on in that business if you got too much stuff messed up into it like the rental property owned in there are you really tracking the income and expense on it no but if i got an llc with the rental property in it and i know the rent coming in goes into it i know the expenses are coming out of it i can see pretty quickly and i feel month-to-month whether that property is doing well or not right but if it's all mixed up and jumbled together you're it's harder to see on the fly and as small business owners we don't have the benefit of having a finance an accounting department that's run these numbers for you and telling you where your what's performing in your business and what's not it's freaking you okay and your bank accounts and by separating these things up it also keeps you more in touch with your business it's not just good bookkeeping for tax purposes it's good bookkeeping and planning for performance of the assets you have and the operational businesses you're running oh my gosh i just added number five performance evaluation um i i i just i took your words and i kind of yeah i if you're okay with that i i consent these they can be used with the permission of matthew sorensen inc not to be used without though by the way with the prior express written consent yeah and major league baseball too they won't they want to stay on it all right so we're defining our bookkeeping and it allows us to evaluate the performance of our different operations and assets because it's not muddied it's clean i'm going to say number six it actually relieves stress and provides relieves stress and provides organization okay now let me add something for those that are able to watch on youtube i used a red line and i started to show money flow options i got a red line going from the s corp down to my personal account and then out and up to an llc to invest in some real estate or a brokerage account or some uni gold silver crypto i also took money and showed oh from the llc i can take money out of my site hustle and go and put it in my home for home improvement i can take money from my s corp and directly contribute to a solo k an hsa or a roth so when you meet with one of our tax attorneys in just a maybe an annual checkup we're going to pull up your diagram every cl guys here's what's cool with our estate planning special with our estate planning special we build you a diagram you're going to get a consultation with an attorney that says how do you want your estate distributed if something happens to you and what do you have because if we don't know what you have how can we fund the trust and we're going to hand this off to one of our paralegals for additional support after if you need it for what's called trust funding if we create a trust and just put it in the drawer it's not worth anything but we want to use it we want to fund it and if we have a diagram would you do an annual checkup with your insurance agent your accountant our office if you choose to do so we want to build a relationship where every year you do a checkup and you go hey look at what i bought i look at what i sold let's update my diagram we print it out we have a copy you have a copy and a pitcher again says a thousand words okay now you took two on the list i don't think that's fair i'm not well i mean it is my birthday so please the birthday card unbelievable i do not expect that response okay it's only good one day a year so yeah might as well use it for what it's worth okay i'm pretty much gonna walk around doing whatever i want saying like well it was my birthday so yeah yeah okay i'm gonna add number seven number seven and i'll read these all again at the very end uh for those on youtube you're seeing the page written up there on the screen um number seven is a state planning coordination estate planning coordination now i'll say a couple words about this i'm sure matt can add to it there's a lot to be said here but as you can see back to the diagram here i'm going to add some lines from the revocable living trust i want your trust to own everything not you now when i say everything i mean any sort of entities titled assets recorded assets maybe even dmv assets like a car an rv a houseboat a ski boat a cabin ranch land whatever you're buying i want your trust to take ownership not you so i'm adding some lines from the trust over to a personal home matt mentioned a brokerage account so put some little dollar signs over there i want the check on those yeah yep it could be on as the owner or it could just be the beneficiary you know in the event of your passing so same thing for your retirement accounts also so you may not you may list your spouse first on beneficiary designations in your trust second that's actually more common for those that have a spouse but that's coordinating the trust is even on like the bank accounts and retirement accounts the trust may not own it but it's the beneficiary after your death personal home bank accounts retirement accounts and i'm going to add li life insurance now um there's a place and a purpose and a reason for life insurance but it's going to depend on your situation and age as to what type of insurance you're going to get whole other topic we are generally believers in some degree of life insurance and you can look at some of our prior podcasts to go over that topic but if i do have life insurance i want the trust to be the beneficiary of it and like man said spouse first then trust so all of these assets if you're able to view this now on youtube you'd see all these assets with little arrows going down into my trust so that i don't own anything my trust is the real owner and that coordinates things so if you pass away become disabled you're in a car accident your trust can take over just maybe for a short period of time maybe you're six feet under and it's time to distribute some of your assets you choose no probate no court and your trust takes over and brings all your affairs together so the lawyers get less the government gets less biden wants to fiddle with the estate planning exemption should be respectful president biden wants to play with the estate planning exemption so we've got all these assets that we want to coordinate so i called it a state planning coordination that's number seven you want to add anything to that matt yeah and remember the estate plan is going to avoid probate by using the trust and outlining what you want to happen to your estate when you pass away and by having it all organized in a clean way like this it's easier for your loved ones when you pass on to come and be like oh well we're gonna sell this asset we're keeping this you know and they're all segmented out in these different entities for whether it's your rentals in your operational business and um on your your bank accounts or retirement accounts so by using the trifecta you make it easy on whoever your trustee is when you pass on recording your estate selling the assets moving them around to your your beneficiaries and heirs and not having to go to a probate court to get this done yep love it i've got an article in my blog that's actually gotten some pretty good traction it's interesting it gives everyone an update on prince uh the famous katie singer purple rain um does he have a 99 song like the 99 we're going to party in 1999 was that he's just two i think that might be yeah more of a little red corvette fan but yeah a little red corvette prince anyway he died about five years ago without a will or trust still in probate the irs is now going at it for a tune of about 34 million dollars and uh it's been a huge mess the biggest probit case in minnesota history because he had no plan now not all of us are going to face numbers and craziness like that but any craziness can really be a challenge for the family that you leave behind or friends whoever if you don't choose yeah it's gonna be a mess okay yeah now number eight can i add number eight yeah i love this one this is a big one i'll i'll say it and then you can describe it you ready for that does it put me on the spot you ready all right i'm ready number eight privacy why would privacy be a benefit of the trifecta do you have anything or do you want me to help you out birthday boy do you want me okay well um why don't you go because this is you're the privacy you know you're more of a camouflage kind of guy you know i am um i'm more of a bulletproof vest kind of guy but that's true um yeah they're more of a camouflage kind of they are different yeah okay privacy is a part of asset protection it does not replace asset protection it enhances asset protection now when you have the trifecta it makes privacy even easier because this trust is not going to be the mark and jennifer kohler living trust heck no i might name it purple rain trust huh get that from i don't think that name got used i think yeah it was wide open prince didn't use it you're good no no it could be blue horseshoe trust what's that from i have no idea i'll give you a hint michael douglas wall street 1980 blue horseshoe that was the company blue horse yeah was that blue horseshoe yeah blue horseshoe was blue horseshit was blue no it wasn't you google it well i finished okay that was blue horseshoe okay okay um okay but you're gonna name your trust something anonymous something that's indiscriminate it doesn't relate to your name because anything that's on public title is actually gonna be owned by your trust so it may be harder for someone to bring a lawsuit and find all your assets now if you're a bad enough person and the lawsuit's big enough they're going to find all your assets but it's going to take some work and it doesn't allow you to hide from the irs it doesn't allow you to commit fraud we're not talking about laundering money but we've we're trying to hide what we don't want easily found now in my operations side i'm march okay marc j kohler inc go ahead you know find it i want you to find my company on the left side but you want to go find my rental property that's owned in a state that i will not mention you could start searching and you'll never find the name because it's not going to have kohler in it so i'm going to use privacy for entities that hold assets and privacy for my trust but for operations i want branding i want trademark i want it out there um and privacy is going to allow us to use addresses and mail forwarding to to create additional privacy where people can't find where these assets reside um okay was i right blue horseshoe what's the verdict you're right blue horseshoe loves anacott steel gordon gecko yeah okay all right is there a boy i wish we could come up with ten reasons we've only got yeah do you have another good one yeah we do need to have ten yeah um i like it i like it for i mean we kind of said planning but it it keeps you organized it keeps your other professionals organized oh i got one i kept i put relieve stress provides organization how about it provides understanding yes so now i know understanding and clarity understanding the clarity you know your lawyer and your accountant knows what the heck's going on and your financial advisor if you have oh ooh ooh and i got number 10. saves money boom i mean boom yeah you gotta yeah end with that you're gonna be without money exclamation point yeah and i i bet you you can come up with a reason why it saves money you know how much time you're going to waste trying to do this we already said it saves taxes okay that's money right yeah number one the number one business expense for any successful business owners taxes like that's your number one expense that's the silent partner you never ask for but you got that just gets a cut whatever you're doing okay but um but so that's a given but there's a lot of other savings you're gonna get here in terms of efficiencies okay things way more efficient it's going to take less time for you to keep this organized obviously you're saving money from asset protection in a lawsuit and assets getting disappearing because you've got your assets and operations and the same thing here something happens in the operational business it's contained over there that liability is stuck it ain't getting over the asset side that just saves you some money your professionals that are going to see this and you know your accountant or anybody you know how much time they spend that they probably bill you for to try and figure this crap out especially a lot of you that are very active and change things year to year yeah you're paying for that oh i've had so many clients say can i show this to my accountant yes that's what you're supposed to do how about showing it to your insurance agent oh now i know where the umbrella goes we need to have insurance coverage here we can get rid of insurance coverage here and your your family better understands your affairs if something happens to you i in our binder that you're going to get with an estate plan say you choose our server let me just tell you right now we're typically 1500 for an estate plan in any state that's with an hour or more with one of our attorneys designing a diagram for you getting your information and drafting a will trust and all these bells and whistles during the special 300 bucks off i know many of you are maybe watching this video or hearing this after the memorial day special we hold annually so it's 1200 bucks during this one month period every year 11th year running but still 1500 i people go it can't be that good i paid four grand for money i paid three grand for mine you guys are cheap so that or therefore you must have a crappy product nope we have spent 20 years crafting a binder with tabs and sections and pieces of parts mine and mats blood sweat and tears literally is in every paragraph of our document we have been through it over and over over 20 years and that's what you're getting the product of the byproduct of is all that work drafting this thing so the point is all those other clients who have used it and have passed on and have actually implemented the trust right that's all in there too yeah of what matters not just some template that was found online yep and the cover where i was going with all this the first sheet in a little plastic cover sheet at the top of your estate plan binder is your diagram drew our paralegal i've we've instructed her in our any client file uh find their diagram print it out in color put it in a in a plastic cover sheet and that goes on top of your estate plan so this just so i but it just saves money because it's not a big mess people set up entities they don't have or need or oh well what about this entity oh my gosh is it on the diagram nope let's see where it fits yeah okay 10 wow sorry i yelled out a little out pro yeah you're gonna have to fix that yeah ten i love it um ten benefits ten benefits of the trifecta um and i like how you said it is to be honored and respected okay now we're not we're not asking you to worship the trifecta just honor it and respect it and i like it and i think if you uh for those of you that have a lot of stuff right now and feel overwhelmed this helps you keep it organized it he helps you keep your brain focused on where where stuff goes um all the 10 reasons we talked about i just i just want to encourage people to keep planning this way and even if you don't diagram this out okay we want you to do that we think so many of you are visual but just implement the basic concepts of it operations on the left side assets on the right side don't mix them into the same thing it gets clunky for taxes and it screws up your asset protection planning okay just that that one concept right there is what we start with with most clients is separating those two things out man i had some so many good analogies and jokes here i didn't use during this for example the left side is dating the right side is marriage see left side is all operational you know it's kind of little white man overbite dancing at night you're out on the dance floor looking at the real estate am i gonna you know yeah and so right side is marriage reading the dough yeah you don't want to be out here you don't want to be just keep it tight keep it tight um also i was going to say what's funny matt said some of you were visual what matt really meant to say is guys are visual and they want to see this it'll make no sense to them they're going to get googly eyes seeing this the women they're going to feel secure they're going to feel like oh my gosh i feel so much more secure because you communicated with me here this communicates with me the guys are like ooh lines bubbles charts color you had me a diagram [Laughter] all right well that is our show today people hopefully you enjoyed that we hope that you have a professional that can help build your diagram if not give us a shout we'd love to help bring it together for you just do an annual review at least take it to all your professionals we sure appreciate you we're grateful you're here we know we're dorks we ham it up try to have fun with it but uh please if you don't have a picture and your plan estate plan in order uh give us a call you can easily google us kkos lawyers.com kkos lawyers.com make an appointment you might be out a couple weeks that's okay there's no rush no bungee dumping or skydiving what else is off limits you can't no yeah that's dangerous can't climb everest you know pretty much high adventure stuff is off the table yeah race car driving um i don't know not wearing your mask in public oh just kidding i want to get into that yeah thanks everyone for listening and um give us a five star review or like or subscribe or however you're watching it um it helped us help other people find the show and um we'll be back next week with open forum where we'll be fielding your questions so if you're like guys i was hoping for open forum or you know get your questions in go to mainstreetbusiness.com submit a question click that link and just type it in you can even audio record one if you if you feel so inclined and then we'll be hitting questions next week on the open forum show you

Channel: Mark J Kohler

Views: 44,647

Keywords: tax, legal, entrepreneur, asset protection, wealth building, cpa, attorney, lawfirm, most amazing top 10, top 10, Trifecta, mark j kohler, podcast, Ten reasons why, Tax planning, perfect legal structure, operational and passive income, business owners, organized, you need the Trifecta, mark kohler, kohlercare, Mark J Kohler, Mark Kohler, Mat Sorensen, Mat, MArk, KKOS Lawyers, s-corp, LLC, estate plan, revocable living trust, income tax, taxes, taxation, tax refund 2021, Legal, Perfection

Id: KvePJ3sMIWs

Length: 62min 8sec (3728 seconds)

Published: Fri May 28 2021