Trusts Explained
On this episode of Next Level American Dream, Abigail and Sean are joined by CJ Matthews & Robert Bernard. They are the co-founders of YourSmartWealth.com, a national program and podcast created to teach small business owners and entrepreneurs how to grow their business profits and retire faster, smarter, and wealthier. We learned so much from our conversation with them and we can’t wait to share it with you.
Key Topics
Trusts and their role in real estate investing
What should you consider when setting up a trust?
How can trusts lead to positive wealth building for your stakeholders?
Connect with CJ & Robert:
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SUMMARY KEYWORDS
trust, LLC, people, house, attorney, property, sued, real estate attorney, real estate, Multifamily, trustee, beneficiary, American Dream, business, lawsuit, small business owners, paperwork, depreciation, cars, Robert
SPEAKERS
Sean & Abigail Thomson, Sean Thomson, Abigail Thomson, Robert Bernard, CJ Matthews
Abigail Thomson 00:00
Welcome to the Next Level American Dream Podcast brought to you by Thomson Multifamily Group. Your hosts, Abigail and Sean will discuss how you can take your American Dream to the next level, through real estate investing, business practices, and personal development. Join us as we share our experiences as a father daughter duo who are trying to accomplish our goal of financial freedom. We hope you learn more about how to define and achieve your American Dream. Here's another episode of Next Level American Dream. On today's episode of Next Level American Dream, we're going to dive into the topic of trust. Joining us today are CJ Matthews and Robert Bernard. They are the Co-Founders of www.yoursmartwealth.com, a national program and podcast created to teach small business owners and entrepreneurs how to grow their business profits and retire faster, smarter, and wealthier. We learned so much from our conversation with them and we can't wait to share it with you.
Abigail Thomson 01:06
Hi, CJ and Robert, how are you guys doing?
Robert Bernard 01:09
Fantastic. How are you?
Abigail Thomson 01:11
We're great. So we're just gonna jump right in. But I wanted to ask a little bit more about your business background. So you guys have just started doing multifamily real estate investment and you're now doing a business education podcast. Could you guys tell us a little bit more about that?
Robert Bernard 01:28
Sure. Absolutely. So I started in real estate about about 2002. And I was doing single family flips and was heavily involved with single family for the last 20 years or so taking them over and you know, stopping the foreclosures and doing stuff like that. But really, I always want to get into multifamily. I mean, that's really where it was for me, because I knew that it was more passive, that just bigger numbers and more leverage to be had. So that's that's really what it was for me.
CJ Matthews 01:58
So I have gotten into real estate in 1998 99. And have done a series of different things depending on what was working at the time. Because as you know, real estate goes through cycles, did single family. Currently I'm doing a lot of assisted living, and raising of money syndication. And when Robert and I got together for this, we both wanted to do apartments, that was a long term play for us. We were very impressed in that. So that's how we ended up here.
Robert Bernard 02:29
Yeah, and then we started a podcast, yes, which is kind of our love right now. So that is called yoursmartwealth.com. And it's for small business owners who basically want to supercharge their financial engine, and basically be able to achieve financial freedom. So we're teaching them for financial freedom, and the tools that are just available to small business owners. So that's really kind of cool. That's our specialty. And we're also teaching them to invest in real estate.
Sean Thomson 02:58
That's good. Yeah, awesome. But amazing tools are amazing thing to do. So today, we're gonna talk about trusts, and, and how they can be used to work with your real estate investments, things like that. So can you kind of just tell us first, what is a trust?
Robert Bernard 03:14
Sure. So a trust is really a contract between the trustee and the beneficiaries. And the beautiful thing about that contract is that it does not need to be recorded anywhere on public record. So it is a way of actually not allowing the public to know who actually controls that trust. And that's
CJ Matthews 03:33
What that means for you is basically that you have a lot more protections, it becomes a lot harder for not only frivolous lawsuits, but lawsuits that someone wants to bring against you just for whatever reason. And it's a huge advantage of trusts, especially when you're working in real estate.
Robert Bernard 03:54
Yeah, it's just another way of holding a piece of property or anything for that matter, you can put a car in a trust, I've placed a boat and RVs and trusts. So you know, it's basically but even bank accounts, and you can even do your own personal pet and a trust as well. Yes, Spot, our dog, could have his own trust. So you know, enough spot ever Bitney buddy, and they came to see you all they get a spot, you just hand the leash over and say Here you go. Because you don't personally own the spot, the trust does. So that's that's kind of an advantage of trust is it separates all of your assets out so that even if one gets sued, the rest don't get infected and affected so to speak.
CJ Matthews 04:43
I guess you could do cattle, cattle in a trust. You could you could you could any kind of valuable item.
Robert Bernard 04:48
Yeah, and there's really two different types of trusts that I use one's a real estate trust and that's obviously for real property. And then another is for personal property, which is pretty much everything else.
Sean Thomson 04:58
So there's a guess there's a revocable and irrevocable trust, you can explain the difference between those two and how they relate to real estate.
Robert Bernard 05:06
Yes. So mostly, we always use revocable trusts about 99% of the time. And that's because if you ever want to take the property and sell it again, you need to be able to pull the property out of the trust. And that allows what that's what's allowed with a revocable trust. an irrevocable trust is kind of once it goes in, it stays in, you know, till there's there are certain criteria which you can come out, but basically, it's meant to stay, you know, you put it in the in the trust and stays there forever.
CJ Matthews 05:34
Yeah. And also, I know, with real estate, we also, my side of things is also from your personal wealth standpoint, quite often, you want to put your personal wealth into trust, that's a big thing. And it's not just one trust, it can be several trusts. But many times once you pass on, you want some control over that to make sure let's say you have a spendthrift child or a spendthrift spouse, one of the things that you want to do is make sure that they can't spend it down. And so what you what you do with that is you also once you pass on it becomes irrevocable, so it's a revocable trust until you pass on. So it's also another technique for helping out with making sure that your legacy remains in good standing.
Robert Bernard 06:19
Yeah. And that would be a living trust. That would be that's a classic example of a living trust, right there is that it turns into an irrevocable after you pass on? Yes. So the the other beautiful thing about trust is that there's no probate that instantly transfers from one generation to the next, without going through probate. So in the moment you pass away, it goes directly to the next beneficiary, successor beneficiaries.
CJ Matthews 06:45
And if you're really fancy, didn't have grandchildren, you can skip the Gen. Yes, yeah, skipping Gen on that. That's, that's advanced stuff, but just, you know, ideas to start thinking about and researching.
Robert Bernard 06:58
Yeah, especially if you want to avoid taxes and stuff like that. There's all sorts of trust that around that. But today, we're just going to kind of keep it simple and just talk just to talk about real estate and talk about some asset protection.
CJ Matthews 07:10
Oh, and we should also say, we are not lawyers, we are not CPAs, we do not play them on TV, although I would love to. So if you know of anybody who's looking for a role, I keep saying I'd love to play that on TV.
Sean Thomson 07:25
Anyway, I believe it will tell us a little bit about how, I guess you guys touch on some of it now. But how does the trust work? Exactly. So let's say you wanted to buy a piece of property or you own a piece of property and you want to protect it, the purpose of the trust is sort of protected from what?
Robert Bernard 07:42
Sure, so the purpose of the trust is basically protected from frivolous lawsuits like CJ said, and what you would do is when you went to go buy the property, you'd actually put it in the name of the trust, and and designate who the trustee is at that point. Okay. And ideally, you want to use a trustee who lives out of state, who is just kind of and use their initials, right. So you just don't want to make it easy for someone to find them. There's a thing called doctrine of latches, which basically says, If you can't find them, within two years just get sued, then the kind of the lawsuit goes away. So someone's gonna have to spend 10 to $20,000, to make sure this lawsuit sticks. So that's how it'll kind of eliminates frivolous lawsuits. But once it's in the trust, then the beneficiary directs the trustee basically, to maintain the property, sell the property, the the trustee could hire whomever they want to basically manage the property. So you could theoretically be the beneficiary and the manager of the property at the same time and not own the property directly.
Sean Thomson 08:45
So it's sort of the own nothing but control everything kind of?
CJ Matthews 08:50
I love that. Yeah, it's super important. I think a lot of people get into real estate to understand that you can go and you can buy something, but real estate is one of the highest classes of losses, yeah, classes of lawsuits. So you're not trying to get out of anything or weasel out of anything, but you're also not looking for any con men to make it. You don't want to leave your door unlocked, so to speak, at least have a deadbolt and, and a regular lock on your door of protection. And so I think that's super important that people realize that you're not trying to avoid responsibility at all, you're just trying to avoid what we all know. litigious society here so that you can function and all your hard work isn't taken away by some comment that comes in and sees that you're not well protected.
Robert Bernard 09:39
Yeah, you know, the insurance should pay out you should definitely have insurance and that should cover any, you know, accidents or liability, right? And it's just end there. And as my mentor about trust said once is that, you know, trust level the playing field, basically if you if you run into somebody, and they don't have an R if somebody runs into you, they don't have anything You don't get anything. But if you run into somebody you have everything they get at all. So with trust is that you don't own anything either. So you just look as poor as everyone else on paper. So that's kind of the beauty of trust is it takes everything out of your possession, basically.
Sean Thomson 10:15
Right. And the purpose of it is to also, I guess, in the states and transferring the ownership of things pretty seamlessly, like you said, there's no probate to those states as they transfer to the to the heirs and things like that. So that's a secondary, I guess, reason for using trust?
Robert Bernard 10:32
Yes, secondary. Yeah, they're really about 20 different reasons. But that's probably one of the biggest ones. I mean, you can save literally thousands and thousands, hundreds of thousands, yeah.
CJ Matthews 10:42
if your state's big enough I, or the value of the property. because years ago, I inherited, and I had to sell the house to pay the taxes because the house was in California, it was in San Francisco, it was over a million dollars, and there was really not much else cash that I could use. So it it forced me to have to sell had that house been in trust, it would have been completely different story.
Robert Bernard 11:09
And really, the beautiful thing about it is that you can actually sell the beneficial rights to the, to the trust. So the trust doesn't actually have to switch hands or anything. It's actually a town in California, I think it's Carmel by the sea, almost nearly 100% of the houses are owned in trust, and people don't sell the property, they sell the beneficial rights to the trust. And that way, the they don't have to pay the taxes on the transfer taxes. And no one has to know who's moving into that new house, you know, who's moving to that house, it remains private. And, you know, they basically their names are kind of kept off public record, because they're all famous, very rich and need their privacy, and they had a good lawyer. Exactly. Exactly. I mean, you can see that, you know, trust really have been for the rich for a long time, because, you know, no one really wanted to spend the money to learn about it, and no lawyer wants to kind of teach his clients unless they come to him or as easily, you know, they're gonna write a big check. So it's not been typically for the typical person. I mean, the living trusts have kind of come around, they've been, they've been much more prevalent, but putting everything in trust, like cars separately, and bank accounts separately, that's really for people that are kind of up either on the income scale, or they know what they're looking for in terms of asset protection.
CJ Matthews 12:25
And however, you know, you were buying the knowledge, the paperwork itself, you are buying the knowledge and making sure that you know how to do it. And there are ways of learning that yourself, besides getting a consultation, or going to an attorney for that information. There's not and what's interesting, is there are still not a lot of people who teach this. No, no, they're not. And attorneys really don't want you to know, because they want to be able to sue you, if everyone had everything and trust, they wouldn't be able to sue anybody. So that whole litigious, you know, tort thing would kind of go away the real estate world. And, and that wouldn't be very good for business. So just saying, and, and so there's places to learn it.
Sean Thomson 13:05
Yeah. The Is there a problem with so if you own a piece of property in the trust? Is there a problem with insurance or maybe refinancing with a bank or you know, any of those types of things? So those come up? challenges? Yeah, yes,
Robert Bernard 13:18
yes. So there are so refinancing with the bank, yes, you actually most the time have to pull it out of the trust for even 30 days or so to get it refinance, and then you can place it back in the trust. So that is one of the issues. And that does leave a permanent trails to who, you know, who might be the beneficiary who took the loan out. So that is one thing is that it's not always easy to refinance inside of a trust. The other thing is insurance, it does cost a little bit more. But, you know, peace of mind, if you want to sleep at night, and, you know, not have to worry about your stuff, you know, if you're sued or not So, and you know, even having the cars and trust the cost a little more with insurance, but but I always found it to be worth it. I mean, I just, you know, I really wanted to have peace of mind. So,
CJ Matthews 14:05
yes, yeah, look, if you're driving an $8,000 car, and you have $125,000 house, and it is all you have, it's probably worth it. Because by removing that it may be difficult for you to rebuild. Now, if you're somebody who has five houses, you definitely need it. So there's not a time for me to say you shouldn't get it. It just all depends on affordability for you. And to me, I think and you probably do too. Almost everything should just be in a trust. Just assume that's part of the cost of doing not only business but living. And it's getting easier and easier to get those as more people get educated about it and hear about it. And I just I feel strongly about that. And I'll tell you, I did not have that many trusts before. But with Robert after hearing some of the stories and with his expertise, I'm like Everything, put it all in there, you know? Yeah, like
Robert Bernard 15:03
I literally don't own anything. I mean, the computer, my phone, even my clothes, they're all in trust. I mean, I really, as a human being don't literally try and own anything. And yeah, it does take some work, you have to create a list of everything and kind of Bill sales showing it that it went to a trust. But once it's done, it's done and you know, updated every once in a while. But you know, that's kind of our philosophy. And really, I think if you're driving the $8,000 car, you probably need to trust more than $125,000 car because the brakes are worse on the $8,000 car, you're more likely to kill somebody
CJ Matthews 15:38
Wow, you went really deep.
Robert Bernard 15:40
But that's that's the myth is that people think that when you have an expensive cars, when you put it in a trust, and no, it's both cars, unfortunately, if you know, if you're not paying attention, if you have that slight notice can both cars can kill somebody. And really, it's not the value of the cards, the fact that it's you know, it can potentially cause injury. And that's really what you want to look at.
Sean Thomson 16:03
Yeah, I'm starting to get it. So the trust is used as sort of a risk mitigation tool, not necessarily just against frivolous lawsuits, but also against just just anything really, that that can get you end up in court, I guess, right? Is that what you're saying? Right, exactly.
Robert Bernard 16:19
I mean, that's like I'm that's why I mentioned the dog, I mean, a Fido not spot. But if Fido was a very aggressive dog, I bet somebody or someone else's dog. Right. And and you were to get sued over that. It, you know, it basically it's like the lizard losing its tail, right? You could lose the tail and still carry on, you know, the lizard still keeps walking away, right and having a life and you know, just lost one piece. So the more you can separate, separate, separate, separate, I like it separate and bifurcate your assets, the better off you'll be.
CJ Matthews 16:52
I think I'm gonna write that word down. I like it.
Sean Thomson 16:54
Okay, yeah. So I guess the one thought kind of came to mind. So I most of my real estate is that is held an LLC, or you know, some sort of entity. And I think I get a lot of the same protections that you would get from a trust? Maybe not, I guess I would be there's a path to who owns the LLC, so that people can find out who eventually owns the property, but how would How would a trust be different or better, more beneficial than just owning your property as an entity? Okay,
CJ Matthews 17:24
I love this answer, by the way, okay. I love this.
Robert Bernard 17:28
Okay. One is that with an LLC, you somebody to sit around to get to get served in a lawsuit. Okay, your registered agent is basically sitting there waiting around for some to serve them. That's why when the LLC was created, they set up the Resident Agent, so the attorneys could soon, okay, now, you also, you could lose what's ever inside that LLC is at risk. So if you had all of your if he had more than one house and an LLC, then all those houses that are inside an LLC are at risk. And the other thing I want to say is that there was actually a lawsuit in Massachusetts, where a landlord had 50 different houses and 50 different LLCs. And because the paperwork wasn't kept up perfectly for each LLC, the judge pierce the corporate veil of all those, and the the plaintiff basically was able to recover all 50 houses and their lawsuit. So the two things I mean, LLC, one is that you have to pay every year to keep them on public record. And you have to maintain the records impeccably, if you screw up in any way, shape or form, you know, basically your corporate veil is could be pierced. So with a trust, you could set it up Look, my favorite trustee is a married woman out of state, okay, and I like to use her maiden name. Alright, maybe hasn't been on record for 20 years, right? Like no one has seen that name. And I like to use initials, it's going to take a good like I said, 10 to $20,000 to find that person. So you the chances of them, you know, of being sued is much lower, because usually when a when attorneys go in and they type in the trust, they're going to see who the trustee is because that's technically owns the property not technically needs to be served as the trustee. And if they're a county or two away, not we're not even talking to state right? If they're counting true, a the the, the the attorney who might be on the contingency fee might go well, you're gonna have to write me a check, because I'm gonna need to hire a private investigator to find that trustee and get them served, then here's the beautiful part is that you could fire that trustee like if you know that lawsuits common. You could just fire that trustee and have a successor trustee in place. So when they go knock on that trustees door, and they go to serve the lawsuit. It's like, Well, I'm not the trustee anymore. And they're like, well, who was the trustee and then it could be like, well, I don't know. And then they have to kind of start over again. So you don't have to make it easy for anybody is what I'm saying with trust. And that's the difference between an LLC is that you kind of got your hand waving my Chi here, Sue me, versus a trust which can be very private and very elusive. That makes sense.
CJ Matthews 20:02
Don't make it easy, don't leave the door unlocked. Right, they can find your address, the door is unlocked. When, when you're looking at, again, you just want to lock and bolt that front door. You don't want people just to be able to walk in, which is kind of what an LLC does. They don't randomly pick you, like, you know, as a place to rob, they just can like, Oh, I'm just gonna try all the doors and Oh, look, this door is unlocked. Yeah. So
Sean Thomson 20:28
I think the biggest benefit to trust would be to for personal property, obviously, for avoiding probate issues. And then for long term Hold tight property. So if you're, if you're planning on just buying and flipping a house, and it's going to take you less than a year, a trust probably isn't something that you want to bother creating. But if you're going to buy and hold that property indefinitely, trust may be something that would be beneficial, right?
Robert Bernard 20:50
Yeah. And I would, I would caution, probably putting, like a large multifamily inside of a trust, though, I know, it's kind of going backwards. Only because if you want to sell that, again, someone's gonna want to see that LLC. But you're right, if you're going to just, you know, keep it in there forever, than a trust would be a good way to do it. You know, and the problem The only other issue really, we talked about this kind of before, which I did answer was that if you're going to sell the property, you got to make sure the trustees there at the closing table, you got to make sure that all the paperwork is being filled out. And everyone's really happy with the with the trust with, you know, the trustee and stuff like that. So you just want to make it easy at closing time with trusts.
Sean Thomson 21:29
So if you were like a, if you were a an investment had four or five rental properties, rental houses, let's say just single family rental properties. A trust for each one might be might be a good idea. Oh, absolutely. For sure.
Robert Bernard 21:41
Yeah, yeah, definitely. And your, your LLC could be the beneficiary, you could start with an LLC, and then have the LLC place the property into a trust for estate planning purposes.
Sean Thomson 21:53
Alright. So in that case, if you were just someone that had four or five rental properties, and you were trying to insulate yourself from litigation, but also you wanted to facilitate that ease of ease of heirship, I would do both things for that person, I guess it would be a very good tool. So
CJ Matthews 22:12
yeah, absolutely.
Sean Thomson 22:14
So where would you start to kind of get it? Let's say, let's say I want to put my property in a trust? What do you guys suggest that someone kind of start that process? Would they contact an attorney? Are there resources online? Or how does that sort of show the console, you started with it.
CJ Matthews 22:30
So if you if you already know exactly what you want, I'm going to specific attorneys, we've got a few that we would, you know, I don't want to say recommend, but I encourage you to start out with, because they understand this process. Also, you can hire a consultant. So, Robert, a lot of times, it's a consultant, you know, we're very clear that he's not an attorney, he's just super, super, super well educated, because that was his specialty, you know, with his MBA in taxes and things like that. This was just something that he learned how to do to protect all his properties as well, and just became very good at it. So there's two ways of going one is, you know, if you already know, at least find an attorney who gets how this works, because some attorneys, yeah, they're trust attorneys. But they but remember, they had to get themselves educated as well.
Robert Bernard 23:28
Most of them just had one semester on it in law school. So they really don't know what my suggestion is that you get educated or you find someone to consult you are you taking, you know who somebody knows. And when you go to the attorney to get the trust set up is that you direct how it goes, this is who I want as my trustee, this is my successor trustee. This is the paperwork that I want put on public record, I don't want the hold trust on public record, I just want the affidavit of trust put on public record.
CJ Matthews 23:56
There's little lists like that, you know, we actually are putting together a class for that. We're not, I'm not here to promote it or anything like that. But all we're saying is that that class is coming up, because we've gotten more and more people realizing that they need to do this. And there really is not a lot of places to go get educated on it. So that we feel that that's going to come out pretty quickly. And in the meantime, if you want a consultation, at least this is a good place for you to start. And we can give you guidance through that process. And when I say we it's the Royal we
Sean Thomson 24:32
if so let's say I'm let's say I'm hearing I'm here in the Dallas area, and I want to create a trust and an attorney maybe where I would start. Are you looking for an estate attorney or a trust attorney specifically or is there what's there specialization that you would look for?
Robert Bernard 24:48
I would, I would start with someone who does trusts a real estate attorney who does trusts that's where I would start because it's really going to be more likely your real estate properties. So real estate attorneys who have experienced Doing trusts, I would probably contact your local Ria, they're probably people in that area that know of an attorney or two that handles closings and handles trusts, and they could set it up. And then just and then just follow basically a few rules to get that, you know, to make sure that trust is not easily suitable. And then it'll you know, and that the beneficiary, the successor beneficiary statement is set up, correct, and how you want it.
CJ Matthews 25:25
But also, you know, you can also go to there a lot of places that are Real Estate Attorneys, that they'll do the paperwork for you, but then have, you know, they may be nationwide. So they'll do it for you, and put it all together, and then they'll contact an attorney in that state, to, to finish out the paperwork, so to speak. So there's also that option, you know, because I have found that you're not always going to find the right person for what you're trying to do in your own backyard. It'd be great. And, you know, we're in Las Vegas. So we've got a lot of high quality people here, because a lot of people have their, their businesses and things like that their LLC is out of here. So you see a lot of professionals, but I have an attorney in Washington, and she's awesome for this kind of thing. She totally gets it, and one out of Southern California. And that's just kind of when I need their services, quite often we just go through them. And whatever state we happen to be in that needs to be handled, they usually have a connection for that to fit finalize out the paperwork. So that's another option.
Sean Thomson 26:37
Yeah, I'm just thinking for someone that's listening to this now. And they're just locally that so they would want to start with probably a real estate attorney, and then get an idea or sense of what their background is, or their strength isn't trusts is. So I mean, not all Real Estate Attorneys are going to be well versed and doing the trust is what it sounds like. So you probably want to borrow their money and then say, Hey, you know, I want to set up these trusts kind of give me an idea of what your what your ability is with those trusts, and then you can decide to use that person or not. And then Are there any sort of online or other resources where someone like me that's trying to do that can go to make sure that they understand what to tell the attorney once they've come up with that.
CJ Matthews 27:18
We should make a checklist.
Robert Bernard 27:20
Yeah, I think we're gonna develop a product around that, to basically tell people
CJ Matthews 27:25
Yeah, because I know, they're really there's really not a lot of information out there. And I'm not sure about the accuracy of that. It is, yeah, there's, there's maybe one guy out there that he teaches this, but he only offers it once a year. That's it. And I don't even think he does consultations.
Robert Bernard 27:49
No, he doesn't.
CJ Matthews 27:50
He's just like, either come to the thing. And you'll get it. And it's like I think every September or something. So if you're here now, waiting till September, that's too long. So yeah, I'm not there's not, if any, any resources out on the internet for this particular thing.
Robert Bernard 28:08
There are some people that that might teach it. I just don't know what they're teaching necessarily. So I can't recommend anybody. At this point in time.
Sean Thomson 28:16
As long as someone starts with a local real estate attorney, if they have any, if that's possible, and then just kind of get an idea of the strength of that attorneys trust experience, that that would probably be a good place to get going. I would think.
Robert Bernard 28:27
Yeah, I like I said, I go to the local RIA, the Real Estate investment Association, and ask around there, there will be somebody that probably knows trust out of that.
CJ Matthews 28:36
Especially the people who've been around for a while they've probably gone through several attorneys trying to find the right one. So yeah, definitely asked for that. And they, I like local areas, because they do always have a nice steady group of people who have been successful, and quite often know, or have a connection to somebody that can help them out. Right, or help you out.
Sean Thomson 29:01
Well tell me when would someone I guess we've talked about some of these issues already or some of these benefits of having a trust but tell me when someone would definitely want to use a trust and then when someone would definitely not want to use the trust so everyone's pros and cons. You know, if you have this situation you've got to have a trust you know, in your opinion. And and if you're facing this definitely don't use a trust you can kind of give us the high and low on when to use one when not to use one.
Robert Bernard 29:27
Yes, so I actually so the best time to use a trust is when you have low income residents and when you have high income residents and let's say in an apartment or in a house, okay, low income people they're trying to get money from someone else. So they tend to sue the high end income people they can afford really good attorneys and get your money. Okay, so that is the the general rule of like when you want to use a trust, I would say definitely for rental properties. Using trusts are really important for any of your vehicles, a boat, cars, you know, and motorcycles, anything like that i would i definitely put in trust. Where I wouldn't use the trust is for flipping houses, you already taking out a loan, typically with a hard money lender or something like that it's just not worth having a trust because no one, no one should be living in the house. And that should be secured enough where people can't take your tools and your supplies anyway to get into the house. And if there's like a playground on the back of the house, I would I would take down the playground while I was rehabbing it just so it's not a there's a term for like a nuisance of public, you know, like a Yeah, so you basically wouldn't do it then. And also, you'd want to keep your flipping business. This is for tax reasons, you wouldn't want to put it in a trust, because you really want to keep your flipping business in a separate separate area. So that doesn't influence your depreciation abilities.
Sean Thomson 30:50
So anytime you have a short term asset transfer, I guess, there's no real need to do a trust it just it's just going to be useless to be useless of a function. Really?
Robert Bernard 31:00
Yeah, unless you really want to keep your name out of records. I mean, you know, if you're really paranoid about being on public record, or your LLC is being a public record, I mean, I would just probably buy things in an LLC in that case, and just try and keep it out of your personal name.
CJ Matthews 31:15
I think you know, what, I want to ask a question about this, because it's not something we've gone in depth about, which is the depreciation portion. You know, like you've purchased something, you've purchased a house, and you still have depreciation rights on it, right?
Robert Bernard 31:30
Oh, yeah, the the LLC, or the trust is like a single single number, LLC. It's distributed in terms of the IRS. So you 20s and 20, different trusts, but essentially, they all collect up to one Schedule E, so that you only have one tax ID number for all those trusts, okay? It's like they don't even exist to the IRS. So and that depreciation would pass up through you as well. Similar to a like an S corp, or whatever. So, yes, that's the beautiful thing is the trust just are beautiful for that as well.
CJ Matthews 32:01
I love it when we talk taxes. I'm like, Oh, you're so sexy.
Sean Thomson 32:07
The trust? The benefit goes to the beneficiary the tax benefit goes, the depreciation benefit goes to the beneficiary of the trust. That's correct.
Robert Bernard 32:15
Yep, that's correct. Yeah, all income proceeds and avails go to the beneficiary. So here's the here's another interesting, cool fact is if you are sued, and the judge says, turned over the beneficial interest of the property of the real estate to someone else, and you're still in control of the trust, right, then you can spend doing repairs for the next 20 years and make it the most beautiful house ever. And they don't see a dime of income. So just, I mean, you know, like, those things are all possible to make it as unattractive, to sue you. Like once the attorney realizes what they're going to get into in terms of not getting a dime. If it's a contingency, then then they're not gonna be very excited to go, go after you.
Sean & Abigail Thomson 33:04
Yeah.
Abigail Thomson 33:05
Wow, this was so educational for both of us. I think. It was incredible. But our final thought, and one of our biggest themes of our podcast is taking the American Dream to a whole other level. So I just wanted to ask, what does the American Dream really mean to you guys? personally?
CJ Matthews 33:26
Straight up for me! $500,000 a year in passive income. So yeah, that's, I mean, to me, that's the American Dream, because it allows me to do all the things I love to do, which is like travel and, and fun things like that, you know, and security and health care and all the things that we worry about when we go to sleep at night. And, and then a little extra leftover for the future. So yeah, that's my American Dream, believe it or not, is that I'd like to get to that place. I'm about halfway there. Not quite, or was. And then so that's for me. Yeah. How about you?
Robert Bernard 34:15
I mean, mine really is what my financial goal is 1.5 million a year in passive income. I love it, you know because of inflation. And really, I mean, I really want to be a jet setter. I really want to own my own corporate jet. I worked as an aerospace engineer or as an aerodynamicist, it's an aircraft company and I saw these business jets going out the door and I was like, that's, that's my goal. That's my dream. I like to leave my daughter really well set up for the future so that future generations don't have to worry about about surviving or making an income. And you know, basically, I have the freedom to do what I want, where I want with whom I want, and and, you know, enjoy life and then leave a legacy for the next 300 years where I mean personally like the environments important To me, so I want to leave money to that and those sort of things.
CJ Matthews 35:04
You're really so supportive on a daily basis, like everything has to be recycled. And it Look, I'm totally, I think it's lovely. However, for him, it really steps into the place of his American Dream is to be helped make a difference in not only an environment, but also people's housing. I mean, he talks about it all the time. Mine's just, you know, I guess I'm just sort of self centered. I was an only child, that was my problem.
Abigail Thomson 35:31
I understand. I'm going to add on to that just a little bit, you guys kind of touched on it slightly. But now that you have defined what the American Dream means to you, how do you think you're currently taking that to the next level? Like what action steps are you taking to level up?
Robert Bernard 35:54
So for us, right now, it's billing This podcast is that we really want to teach, you know, probably about 1000 small business owners, you know, like doctors and chiropractors, and dentists really, to take their small business and move it up, and then have them invest it with us, and, you know, have them invest, you know, $100,000,
CJ Matthews 36:14
Yeah, to get them into real estate. Now, there's some people out there that already do that. But it's on such it's a very small scale. And we'd like to help people not have the golden handcuffs, or the velvet handcuffs that people talk about, where you're working, and you're making just enough to be successful, but not enough to have true freedom, it's almost a little bit, it becomes a chore because if you hiccup or sneeze or are down for three days, all of a sudden your business takes a tank. And so it's almost like a your own insurance by having real estate. And so we would love to be supportive to people who want to do that. Business owners are really the people who, especially smaller business owners are stuck without all the benefits that everybody else has, you know, they have to pay for their own insurance, they, if they're sick, the business stops running most of the time, you know, little things like that, that that are easily fixable with passive income. And we'd like to be the ones who help them do that.
Robert Bernard 37:15
And they also have huge advantages of being a small business owner that no one else can take advantage of. They have qualified retirement plans that no one else can do. They can also use their business to maximize their tax deductions. So basically, you're paying as little tax as possible. That's also part of the American dream for me is that I get to control how much taxes I pay. That's important for me as well. So I like that ability here in America.
Abigail Thomson 37:37
So, CJ and Robert. Yeah, thank you guys so much for being here. You guys are depths of incredible knowledge. Is there a way for our listeners to get in touch with you guys or even just learn more about what you guys are doing as a company?
Robert Bernard 37:51
Yes, so they can get a hold of us at team@yoursmartwealth.com. They can also visit our website, yoursmartwealth.com Yep. And then we also have a YouTube channel that we're putting up the yoursmartwealth.com. And right now there's a the your smart wealth Survival Guide to 2020 for small business owners that's up there now that people can go watch and get some ideas of their small business owner how to survive in these economic times and thrive.
CJ Matthews 38:18
And look, that's good for any time, really. But especially right now.
Abigail Thomson 38:23
Oh, yeah, that's fantastic. We'll make sure to make that accessible to all of our listeners in the description.
Sean Thomson 38:30
yeah, we'll put that in the show notes so everybody can find you guys. Yeah, perfect. for coming on. We really appreciate you guys taking the time to come and do the show with us. And, you know, we're new at this. So hopefully, hopefully, it was a good experience for him. And I'm sure the listeners got some good information out of that, too. You know, trust trusts aren't well known. So it's one of those small topics, they have a big benefit. So I appreciate you guys sharing
CJ Matthews 38:51
Well, we really appreciate you giving us this opportunity to share this with the world because like we said, it is a part of our piece even though we like making money. We also are very much into making sure people have enough information so they can make money too. And it's you know, all ships. What is it all ships rise to on the tide is met it and we believe strongly in that.
Sean & Abigail Thomson 39:15
Excellent. Well, thanks for so much for coming.
Robert Bernard 39:17
Yeah, you're very welcome. All right. Take care.
Abigail Thomson 39:20
Thanks for joining us for another episode of Next Level American Dream. If you would like to learn more about what we talked about today, want to contact a team directly, or interested in passively investing and being a part of our deal room, head over to our website at www.thomsonmultifamilygroup.com Before you go, please leave a review! Your comments help us create more episodes for you to enjoy.