Is your money working hard, or hardly working? Brett Swarts, the founder of Capital Gains Tax Solutions, shares the strategies and solutions he uses to free his clients from feeling trapped by capital gains tax. He shares some examples, reveals how it works, explains why it’s totally legal, and changes the way you’ll look at trusts, taxes, and investing forever. Listen in to hear Brett’s advice on what to do during this tough time in the market - and get a glimpse into what can be done to build and preserve your wealth for years to come.
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Time Stamped Show Notes:
- 00:40 – Introducing Brett who, at a young age, helped his father with real estate buying, selling, and building residential properties in the Bay area
- 01:10 - He later learned about real estate investing and fell in love with helping people find real estate investment solutions
- 01:45 - When the 2008 crisis hit, he set out on a journey to help his family and friends escape feeling trapped by capital gains tax
- 02:05 - Now he educates about the 1031 tax-free exchange and the capital gains solutions people can use
- 03:50 - The issue is taking on too much “dumb” debt
- 03:50 - During this time, you want liquidity and diversification; you don’t want to buy a property just to buy, you want to wait until you can buy for a lower price
- 04:10 - The 1031 can sometimes force people to buy high and buy something of equal or greater value, which means equal or greater debt
- 04:20 - A gentleman in Georgia who just closed moved his funds to a deferred sales trust to protect his wealth and see what pans out with the pandemic
- 05:15 - Don’t overpay for a property just to pay less tax
- 06:00 - Advice Brett gives to his clients when emotions are running high
- 06:25 - Build a team around you of people that have your best interest in mind that can help guide you
- 06:55 - Have a tax-deferred optimal-timing wealth plan, diversify, take on more reserves, and maybe sell a property that still has its value
- 07:30 - Move into a strategy of preservation; the largest wealth transfer in the history of the U.S. is coming because of baby boomers
- 08:50 - They want to fund their retirement, travel, release liabilities, and get rid of debt but they’re faced with a capital gains tax
- 09:10 - A deferred-sale trust could be a way to work around that, diversify, and get liquid
- 10:00 - You need to know your vision, state in life, and goals to set up a plan that works for you; the people you work with need to provide more value than ever
- 11:15 - Trade illiquid assets and turn them into liquid ones, and do it all tax-deferred
- 11:30 - More on the deferred trust
- 11:35 - It’s through tax code IRC 453, which is also known as an installment sale, a seller carryback; their version is through IRC 1031, which has timing restrictions
- 12:00 - Most notes go for ten years, can be renewed, and can be passed to your kids inside a living trust, remaining tax-deferred
- 12:30 - You can buy a new property with those funds, still tax-deferred
- 13:14 - Their average client
- 13:15 - Their average deal is $2.6 Milion and they defer around $400,000-500,000 in liability; their minimum is $500,000 of proceeds and $100,000 in tax liability
- 14:50 - As an agent, remind your clients that they don’t have to plow through all they have and more into their next home
- 15:20 - These deferred sales trust solutions work for many things, including businesses and even horses
- 17:30 - A hypothetical
- 17:50 - If someone sells an asset for $1.9 Million, pays off all their debt, and puts about $800,000 into the trust; now, it can be invested into whatever, whenever
- 18:12 - The only limitation is that 20% of it must stay liquid; funds are directed from the trust directly to the real estate asset
- 18:50 - How ownership works within the trust
- 19:30 - You own it within a JV partnership with the trust so you get a brand new depreciation schedule; you can form an LLC and partner with the trust
- 20:40 - The trust acts as a silent partner; you can have one trust with multiple notes
- 23:15 - How to contact Brett: The Capital Gains Tax Solutions podcast, YouTube channel, and website - and be sure to grab their free guide on the site
3 Key Points
- Don’t overpay for a property just because you want to pay less tax.
- Human nature is to buy high and sell low because you let your emotions overrun you.
- It’s complicated: Get a professional to help you navigate tax solutions.