Wealth Actually

This episode is a little different. I’m going to talk about the importance of balance and health. This time I’m the example. I’m hitting the half century mark this year. After 3 years of COVID disrepair and neglect, I knew I needed a change. In this episode, I’m going to describe those changes and what it’s done for me. I’ll also be commenting on the significant gap between health, fitness and the wealth management industrial complex. In brief, I think the industry has a huge blind spot around the intersection of health and wealth and is dangerously ignorant about the widening time and expense divide between one’s late career and death. To help me make sense of this is, noted expert, Phil Pearlman. DR. PHIL PEARLMAN, is the founder of THE PEARL INSTITUTE. He is an expert in the areas of personal health, human change processes, and systems integration. Phil and I didn’t work together. However, I hope his unique perspective on balancing career, fitness, mental health and other facets help put my experience into context and give the audience some lessons from my journey. About Phil DR. PHIL PEARLMAN, is the founder of THE PEARL INSTITUTE. He is an expert in the areas of personal health, human change processes, and systems integration. Phil is the author of The Primecuts Newsletter, which focuses on cultivating a healthy lifestyle, mindset, and identity through the powers of creativity, reinvention, and grit. Phil is an advisor to and investor in social/digital media companies across stages of development. Previously, he served as CBO and CMO at Osprey Funds, EVP at Bank OZK, Executive Editor at Stocktwits, and Interactive Editor at Yahoo Finance. Phil earned a doctor of psychology degree from Argosy University. He lives with his wife and two boys in Montebello, New York. https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

“Venture Capital” is a small subset of private equity surrounded in mystique and fable. In reality, the world of start-ups is filled with the highs and lows of hard work, loneliness, crushing disappointment and, sometimes, unbelievable success. The bold founders usually have a vision to disrupt the status quo and build a new world around that idea. The VC community is a unique culture that understands the founders’ motivations. It provides the resources, support and discipline to help them prove their idea, grow, survive, adapt and thrive in the face of the longest odds. They say “it takes a village.” In “Venture Capital”, the hope is that these mavericks are surrounded by an ecosystem of investors that understand the disruption they feed and have the patience to let them manifest their vision. JULIE FREDRICKSON is the Managing Partner of CHAOTIC CAPITAL. She will help us understand what it takes to survive and thrive in this space and skewer some sacred cows along the way. Julie’s Background “I’m a founder with experience in retail and e-com businesses across all stages. I’ve raised from venture, PE, and crazy people. for everything from cosmetics to online advertising. A couple of my companies even exited and are still around. My first company was Coutorture Media, a luxury affiliate publishing and e-commerce network acquired by Sugar Inc. I then founded playAPI, a developer tool kit and SaaS platform for digital brand marketers. Most recently I went physical with Stowaway Cosmetics a direct to consumer cosmetics brand, which is now part of WIN Brands Group.” Venture Capital Generally- What does success of individual investment look like?What does success of portfolio look like? Differentiation 1. Underwriting Businesses: Asset-Light & Equity-Efficient:  “We focus on ventures fitting the VC mold, prioritizing scalable, asset-light companies that require minimal equity financing. Two of our most successful seed investments raised <$50 million to achieve unicorn status while earning hundreds of millions of dollars in revenue and tens of millions of dollars in profits per year.” 2. Founder’s Unique Point Of Leverage:  “Every successful startup has a unique point of leverage that allows them to gain escape velocity going from 0 to 1. We seek startups that possess a proprietary advantage such as  Pre-existing customer relationships,  Proprietary community driven distribution channels, or  Innovative technology, to propel their initial growth and achieve escape velocity.” 3. Resilient to Competition: “We invest in companies whose products and solutions would be painful for incumbents to replicate. We look for those that: Cannibalize existing profit centers,  Disintermediate legacy distribution models, or  Require replatforming to create an insurmountable competitive edge.” 4. “Avoiding Over-Complexity: Great startups must maintain maniacal focus while they scale.Acknowledging the high failure rate of startups, we steer clear of those with multiple dependencies, instead concentrating on businesses with a single, transformative opportunity for success” CURRENT CONDITIONS Raising Capital Deploying Capital Macro Environment and its effect on allocators – how much do you stay focused on your mission vs pay attention to what’s happening in the world- how does that work LIGHTNING ROUND QUESTIONS First over the wall vs let others make rookie mistakes Do you diversify investments around and idea? How real is the East Coast / West Coast Capital Culture schism? International? How do you avoid “Jangly key syndrome?” Without giving away the secret sauce, how do you evaluate founders / leadership? Any post-COVID lessons or trends to focus on? Location, WFH, trends in Gen-Z etc?)  DISCLAIMER: THIS PODCAST IS FOR EDUCATIONAL PURPOSES AND DOES NOT REPRESENT AN ENDORSEMENT OF CHAOTIC CAPITAL AS AN INVESTMENT. HOW DO WE STAY IN TOUCH? CHAOTIC CAPITAL https://twitter.com/almostmedia https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

Real Estate investing is seen as the holy grail of passive income and wealth independence. One of the popular facets of real estate investing is the tax advantage that much of the IRS code provides to the owner/operator. High on the list of cocktail party chatter topics is the concept of COST SEGREGATION. It is a way to deconstruct the components of real estate developments, depreciate them faster than the normal life of a building and net the deductions against other income. To explain this concept, MITCHELL BALDRIDGE joins the podcast. The Texas-based CPA and CFP will take us through the ins and outs of Cost Segregation Studies and discuss the importance of solid bookkeeping and delegation for entrepreneurs and other business operators Cost Segregation -Describing the concept – accelerated depreciation and deductions-Potential benefits in numbers-Types of projects where it works (Who is it for?)-Process- getting study, dotting i’s, building in documentation now and forward-Traps for the unwary- Sloppiness, Passive vs Active income, Full-Time Real Estate Occupation, -Recapture- what it is and how to manage it Bookkeeping and Bulletproofing your Business for Future Sale -Importance of dotting i’s-Looking for tax savings-Delegating intensive work-Coordinating with advisors https://www.betterbookkeeping.com/ How do we find you? https://twitter.com/baldridgecpa Links https://www.recostseg.com/ https://baldridgefinancial.com/services/cost-segregation/ https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

One of America’s best (and most quotable) judges, Learned Hand said, “Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.” What happens when the IRS disagrees with the way you’ve arranged your affairs? What do you do when you receive “fan mail” from the IRS (or the State Taxing authority) KELLEY C. MILLER, ACTEC Fellow and Partner at Reed Smith in Washington DC. helps us understand the process of an IRS audit, good practices in dealing with an audit, and inside knowledge of how the process works at the agency. This episode is full of good information on an uncomfortable, but vital, topic for families that are pursuing complicated planning that may catch the attention of the taxman. Background and Good Conduct Rules of Thumb Be Honest Be Prompt Be Complete Be Clear/Organized Be Consistent and coordinated with other tax and gov’t authorities Be Quick to Alert the IRS if issues come up What is the IRS / State looking for? In a word, UNDERPAYMENT . . . or “more revenue.” Listed Transactions (ex. syndicated conservation easements) Unreported income Mischaracterization of gain vs income Filing status (ex. Domicile / Residence – esp. at state level) and Dependents Itemized deductions (Business vs Personal) Eligibility for credits / treatment Sources of “referrals”: Data (Demographics, Internal Data, HNW, UHNW patterns, Social Media, AI in the future?) News, Spouses, Other Agencies (Corporate Transparency Act Implications) Past conduct How is the IRS to deal with? Other states? They are professional and sophisticated but under-resourced Whom are they looking for? Improvements? Potential new staffing and technological investments Is not incorporating your advice team ever a good idea? Civil vs. Criminal vs Collections Departments Process 1) Open the Letter!  (Not a good time to stick your head in the sand) Is it an audit or a request for additional information? What person or entity is being audited? What is the focus of the audit? What documentation is being requested? What kind of audit? Correspondence Audit: The IRS requests additional information regarding a part of your tax return, such as receipts or canceled checks. Office Audit: The IRS requests that you bring specific documentation into your local IRS office- the audit happens there. Field Audit: An IRS agent shows up at your place of business to conduct a face-to-face audit. Taxpayer Compliance Measurement Program Audit: The mother of all audits- one that requires full documentation down to birth certificates to test the Agency’s scoring systems. 2) Notify the team and decide on the response strategy Who is quarterbacking the response and the interaction? Accountant / Attorney / Wealth Manager / COO When should the tax preparer run things vs an attorney? Do you need other expertise? Should you have Attorney / Client Privilege? Very likely. Who is compiling the information? 3) Responding to the request You should respond to the IRS/State within 30 days of receipt How should that occur? Call / letter? Crafting the response letter Supplying the requested information 4) No Action or additional payment? If it’s determined I owe more, what is the process of appeal? What if I don’t have it? Payment plans? 5) Closing the file Documenting the outcome Post-mortem – What practices were audited? Should we do anything different in tax planning Any other storm clouds on the horizon? Lessons Learned- Updating documentation and administration process going forward How Do We Stay In Touch with Kelley? KELLEY MILLER at REED SMITH KELLEY MILLER on LINKEDIN https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

“Behavioral Finance” is all the rage. BeFi (as the not-so-cool kids in the financial world call it) is the next phase in guiding individuals, teams, boards, companies, and leaders to better decision-making. There is plenty of material telling us where people get it wrong. Even the best brains get deceived by a litany of behavioral biases. These biases cause people to fall off the track of economic rationality. However, even with all of these labels, there is little guidance on how to identify and use this context. Until now . . . PETER ATWATER argues in his new book “THE CONFIDENCE MAP” that there is a straight forward mental model. https://www.amazon.com/Confidence-Map-Charting-Chaos-Clarity/dp/0593539559/ It can diagnose an individual’s emotion and confidence, its directionality and its relationship to group and social mood. Further, Peter asserts that people (and their advisors) can use this information to pull decision-makers out of the own limitations of their own silos. People will be able to recognize what is occurring in their surroundings, mitigate risk and maximize opportunity.  We’ll discuss Peter’s findings, the mental model he’s developed and, finally, the process of writing the book.  Outline Quick background- The Confidence Map- central tenet of the book The context of one’s place on the confidence map has as much to do with the decision making process as data and logic. Rationale behind the book – what was the problem that you were seeing? What was your research showing? Examples Johnson and Johnson Tylenol Case Boeing 737 Dreamliner Bud Light Defining the axis- Toggling between “Certainty and Control” Toggling between “Confidence and vulnerability” (not price!  Are humans innumerate?) Mapping human confidence (and using it in a forward looking manner) Individuals and recognizing their own position in the chart Leaders looking at group confidence and mood “at scale” to mark strategic shifts Collective mood vs individual mood Defining the group (which group is the individual following) Recognizing where one is on the map personally vs the group vs the masses Augmenting “behavioral finance” Behavioral economics tries to give us the tools and bias catalogues of where human beings fall off the train of rationality How do we think about the confidence map to help people predict (and avoid) their own frailties – especially around big decisions? What is the “equipment” you need to use these tools effectively to help me to understand their decision contexts and make better decisions (potentially in times of maximum stress)?  Is there a danger that this is giving a loaded gun to the financial services industrial complex? What was the book writing process like? Turning a box of ornaments into a Christmas Tree Using a Coach What were the struggles? How do we stay in touch? https://peteratwater.com/ Linkedin: Peter AtwaterTwitter: @peter_atwater Amazon: THE CONFIDENCE MAP https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

The Corporate Transparency Act is legislation that is going to touch all high net worth clients in 2024.  This is like KYC procedures on steroids and investors need to be aware of it. Attorney, STEPHEN LISS helps us understand the scope of the developing new regime. The financial reporting system currently makes it cumbersome for regulators and law enforcement to track the asset ownership and cash flows.  Lessons learned from the Panama Papers and Pandora Papers disclosures signaled the need for a change.  Congress passed the CTA legislation in 2022 to combat money laundering, tax evasion and other illegalities.  After public input, final rules were recently promulgated. There are significant reporting responsibilities and criminal and financial penalties for non-compliance. The impact of these initiatives takes hold in 2024- It’s becoming a point of emphasis for the legal, accounting and financial services communities. It will be significant part of the estate planning process for HNW clients going forward. With the expected “2026 avalanche of estate planning. Clients are in a for a surprising change in the standard procedures around standard techniques. The concept of “Putting it in an LLC” or “putting it in a trust” is about to become more expensive, complicated and time-consuming- particularly in dealing with the law firms and especially financial institutions. STEPHEN LISS is a partner at Dungey and Dougherty and is on the forefront of this legislation and its impact on clients. We’re going to talk about the scope of the CTA, it’s impact and why it’s important for HNW clients to start early and get ahead of these requirements when the planning avalanche comes. Background Congress enacted the Corporate Transparency Act (“CTA”) under the Fiscal Year 2021 National Defense Authorization Act on January 1, 2021. The requirements of the CTA are being implemented “to help prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity, while minimizing the burden on reporting entities.” That said, even FinCEN acknowledges the enormous reporting burden imposed by the CTA, which it most recently estimated to be over 118 million hours in 2024, with an annual burden of over 18 million hours thereafter. The CTA added 31 USC §5336 to the Bank Secrecy Act with the title, “Beneficial ownership information reporting requirements”. The CTA has three core elements: Reports to FinCEN The CTA requires certain entities (each a “reporting company”) to identify itself, its primary owners and officers (each a “beneficial owner”), and certain professionals who helped to form or register the reporting company (each a “company applicant”). The reporting company must then report to the Financial Crimes Enforcement Network (“FinCEN”) information sufficient to identify the reporting company, its beneficial owners, and any company applicants (“beneficial owner information” or “BOI”). Control Access to Information FinCEN will provide BOI to government regulatory and investigatory bodies, but it will not be made available to the general public. In addition, there are specific procedural requirements for government actors to access this information, along with civil and criminal penalties for improperly accessing or using such information. Revised Due Diligence Requirements The Secretary of the Treasury is required to revise Customer Due Diligence requirements for financial institutions to conform to the CTA, and account for the ability of financial institutions to access beneficial ownership information. Outline What is the Corporate Transparency Act? The purpose of the Act is to Set a clear federal standard for incorporation practices Protect U.S. national security and commerce Enhance national security, intelligence, and law enforcement efforts to combat money laundering, terrorism financing, and other illicit activities Bring the U.S. into compliance with international anti-money laundering and countering of terrorism financing standards The Act does not create a public registry of business entities in the U.S. What Does the Corporate Transparency Act Require? •A Reporting Company must disclose information about the entity itself, the Company Applicant, and its Beneficial Owners to the Financial Crimes Enforcement Network (FinCEN) of the Department of Treasury •For each Beneficial Owner or Company Applicant, the disclosure must include •Full legal name and date of birth •Each Beneficial Owner’s current residential address, and each Company Applicant’s current business address •An identification number (such as a driver’s license or passport number) or FinCEN Identifier number (available upon request from FinCEN after providing name, address, and date of birth) and a digital copy of the identifying document •Effective January 1, 2024 A REPORTING COMPANY must also disclose its: •Full legal name •Any “doing business as” names •A complete current business address •The State, Tribal, or  foreign jurisdiction of formation •For a foreign reporting company, the State or Tribal jurisdiction where such company first registers •The TIN of the reporting company or foreign equivalent if a foreign reporting company has not been issued a TIN by the IRS FINCEN Identifier •Provide the information that normally must shared with a Reporting Company and FinCEN will issue you an identifier number that can be provided to any Reporting Company. •Any individual or entity with a FinCEN identifier must report to FinCEN within 30 days of any change in BOI or if they become aware or have reason to know any information was inaccurate. •If a Reporting Company and an entity that owns it have the same beneficial owners, the Reporting Company can use the entity FinCEN identifier instead of disclosing BOI of the owners of that entity. Protection of Beneficial Ownership Information The CTA does not authorize public disclosure of BOI FinCEN can disclose the information to: •A Federal agency engaged in national security, intelligence, or law enforcement activity, for the use in furtherance of such activities; •A State, local, or tribal law enforcement agency as part of a criminal or civil investigation, with court approval; •A foreign government, to assist an investigation if a Federal agency requests the information; •A financial institution with the consent of the reporting company, to facilitate compliance of the institution with customer due diligence; or •A Federal regulator to determine compliance of a financial institution with their customer due diligence requirements. Tax Adminsitration Officers and employees of the Department of the Treasury can access “beneficial ownership information for tax administration purposes…” 5336(c)(5)(B) Security Protocols The protocols are intended to: •Protect the security and confidentiality of any BOI; •Require requesting agencies to establish, maintain, and abide by a secure system that would store BOI; •Limit the scope of information sought, consistent with the purpose of seeking the information; •Restrict access to BOI to those who have undergone appropriate training, and who are authorized to access the information; and •Establish an auditable system of records to track each request, purpose of the request, name of requesting individual, and any disclosure of information. •Proposed regulations were issued December 16, 2022. Penalties for Government Misuse of Information •Any individual guilty of unauthorized disclosure or use of Beneficial Owner information •Is liable for a civil penalty of $500 per day the violation continues or is not remedied and •If found criminally liable shall be fined no more than $250,000, or imprisoned for 5 years, or both or •If violating another law of the United States or any illegal activity involving more than $100,000 over a 12-month period, the maximum criminal fine increases to $500,000 or 10 years imprisonment. What Does the Corporate Transparency Act Require? A Reporting Company must disclose information about the entity itself, the Company Applicant, and its Beneficial Owners to the Financial Crimes Enforcement Network (FinCEN) of the Department of Treasury Reporting Companies •The Act defines a Reporting Company as: •A corporation, LLC, or other similar entity that is 1.Created by filing a document with a secretary of state or a similar office under the law of a State or Indian Tribe; or 2.Formed under the law of a foreign country and registered to do business in the United States by the filing of a document with the secretary of state or a similar office under the laws of a State or Indian Tribe.  •LPs, LLPs and business trusts (statutory trusts) are “similar” entities •Trusts and general partnerships are excluded from this definition Exemptions for Companies •The Act excludes 23 types of entities from qualifying as a Reporting Company. A “Large Operating Company” •With 20 or more full time employees in the United States •30 hours a week or 130 hours per month •With gross receipts or sales as reported on a federal income tax return of over $5 million •Must be U.S. sourced income •With an operating presence at a physical office within the United States 501(c) tax exempt charitable organizations and foundations 527(e)(1) political organizations 4947(a)(1) and (2) charitable and split interest trusts Publicly traded organizations Domestic governmental authorities Banks, credit unions, depository institutions, and money transmitting businesses Broker dealers and RICs Securities exchanges Insurance companies Public utilities Public accounting firms registered under Section 102 of the Sarbanes-Oxley Act Financial market utilities Certain pooled investment vehicles An entity wholly owned or controlled by an exempt entity is also exempt from the obligations of a reporting company unless the exempt entity was: A money service business, A pooled investment vehicle, or An entity assisting a tax exempt entity. Company Applicants An individual who directly files a document creating a domestic reporting company. An individual who directly files the first document registering a foreign reporting company. The individual primarily responsible for directing such filing. There can be two Company Applicants, but no more. Only applies to a reporting company formed or registered after January 1, 2024. Who is a Company Applicant? 1.Attorney directs paralegal to form LLC and paralegal faxes required documents to secretary of state. 2.Attorney directs paralegal to form LLC and paralegal completes online form provided by Formation Co. 3.Attorney directs paralegal to form LLC and paralegal faxes form to Formation Co.  Employee of Formation Co. then faxes that form to Secretary of State. 4.Partner tells associate to form LLC.  Associate tells paralegal and paralegal faxes required documents to secretary of state. Who is a Beneficial Owner? Beneficial Owner Not a Beneficial Owner An individual who •A minor child (as defined in the State in which the entity is formed) if the information of the parent or guardian of the minor child is reported in accordance with the Act. •Directly or indirectly •Through any contract, arrangement, understanding, relationship, or otherwise— •An individual acting as a nominee, intermediary, custodian, or agent on behalf of another individual. (i) Exercises substantial control over the entity; or •An individual acting solely as an employee of reporting company and whose control over or economic benefits from such entity is derived solely from the employment status of the person.  This does not apply to senior officers. (ii) Owns or controls at least 25% of the ownership interests of the entity. •An individual whose only interest in a reporting company is through a right of inheritance. •A creditor of a reporting company, unless the creditor otherwise falls within the definition of a Beneficial Owner. Who Has Substantial Control? Senior officers (Includes a president, CFO, general counsel, CEO, COO, or anyone who performs a similar function) Those with authority to appoint or remove any senior officer Those with authority to appoint or remove a majority of the board of directors (or equivalent) Those who can direct, determine, or have a “substantial influence” over important decisions made by the reporting company. What is an “Important Decision”? The sale, lease, mortgage, or transfer of any principal asset Reorganization, dissolution or merger Major expenditures, investments, and issuance of equity or debt Selection of business lines or geographic focus Setting compensation for senior officers Entering into significant contracts Amendment of governance documents Who is a 25% Owner? Ownership interest is defined broadly to include equity, profit sharing agreements, voting trusts, convertible debt, and options. Ownership interests can be direct or indirect, and can include a mere understanding or relationship. Trust assets are attributed to: -A trustee or other individual with authority to dispose of the asset. -A beneficiary who is the sole income and principal beneficiary. -A beneficiary who has the right to demand substantially all of the trust assets. -A grantor if the trust is revocable or they otherwise have the right to withdraw trust assets regardless of form. Calculating Ownership of a Reporting Company -Any options or similar interests are treated as exercised. -If there are capital and profits interests you compare the individuals interests to “the total outstanding capital and profit interest of the entity…” -For corporations, it is the greater of the vote or value held by the individual. -If an ownership interest cannot be calculated with “reasonable certainty” an individual is a beneficial owner when owning or controlling at least 25% of any class or type of ownership. When is a Report Due? Initial Report Existing Reporting Companies- by January 1, 2025 Domestic Reporting Company formed January 1, 2024 and after—30 calendar days Foreign Reporting Company registered January 1, 2024 and after—30 calendar days Updated Report Within 30 calendar days after there is any change to any information previously submitted to FinCEN. Change in who the Beneficial Owners are Minor reaching age of majority Information related to a Beneficial Owner (like a change in address or change in drivers license number) An entity becomes exempt from reporting OR is no longer exempt If a Beneficial Owner dies, a change occurs when the estate is “settled.”  That term is not defined. Correcting A Report If a Reporting Company becomes aware “or has reason to know” that information contained in a report is inaccurate they have 30 calendar days from that date to file a corrected report. Penalties •An individual who willfully provides false or fraudulent information, or willfully fails to report complete or updated Beneficial Ownership information faces a civil penalty of $500/day the violation continues or is not remedied, and a criminal fine of up to $10,000, and/or 2 years imprisonment •There is a 90-day safe-harbor if an individual voluntarily submits a report containing correct information What Should You Be Doing Now? Start Estate Planning Now Budget 2x the Time needed to implement Budget 2x for E&O insurance and administration costs Address the CTA in your engagement letters. Address the CTA in operating agreements. Notify all your clients the CTA is coming January 1, 2024. Decide- Will you provide CTA advice or will you find a vendor? Most Advisors should obtain a FinCIN Identifier as soon as you can. Stephen Liss Contact Information STPEHEN LISS BIO https://www.dungeydougherty.com/stephen-liss https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

State Estate Taxes – State Estate taxes can be a nasty surprise- especially with the disconnect between State and Federal Exclusions. Currently, the Federal Exemption stands at $12.92mm per person. 17 states have and estate or inheritance tax and it’s often uncoupled from the Federal exemptions. In New York, the state estate tax exclusion stands at $6.58mm per person- and that exclusion isn’t portable with a spouse. With state estate tax rates reaching 16%, this could lead to a potentially big number. However, planning around this tax can be complicated. Estate Planning Attorney, GEORGE BISCHOF is here to define the problem and the clients it affects, provide some context for planning and give us some ideas on how to deal with it. George is an Estate Planning Attorney here in New York City at the WILLS AND TRUSTS FIRM (https://thewillsfirm.com/). He focuses on clients between $4 and $20mm in net worth. Estate Tax Federal ($12,920,000 per person) vs NYS ($6,580,000 per person) More New Yorkers can be caught in this than they think Real Estate can be a big issue Linkage to Gift Tax (NYS has no gift tax) Rates (40% Federal vs 16% State) NYS Cliff – Established in 2014 105% Estate Tax Exclusion is where the cliff kicks in. Graduated Tax Calculation Goes back to dollar zero and can be a $250K+ mistake Calculated on NYS property NYS has floated a longer phase-out range, no progress yet Being a City vs State Resident is irrelevant (as opposed to an income tax situation) Portability – Federal: Yes, NYS: NO!!! (but, Credit Shelter Trusts can be a solution) Ways to Reduce / Minimize This Tax Using Charity and a drafting Santa Clause (a conditional formula bequest that leaves money to your preferred charity (or one chosen by your executor or trustee), but only if doing so will result in a higher after-tax estate for your beneficiaries). Changing your residence AND domicile (and cutting NY linkages!) – See an in depth discussion on this topic with attorney MARK KLEIN – (SNOWBIRD PLANNING EPISODE) Using Gifting to get “under the cliff amount” (but beware of 3 year look back). Moving wealth to non-NY jurisdiction Maximizing “portability” with Disclaimer or Credit Shelter Trust structures Disclaimer language in wills and/or trusts Make sure you have an independent co-trustee   BONUS: I wrote about this topic back in 2019 and it gives some context around the planning. (The numbers have not been updated): https://frazerrice.com/blog/the-return-of-the-nys-estate-tax-cliff/ https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/  “Frazer Rice is an employee of Next Capital Management, LLC. This podcast is not investment, legal, or tax advice, nor does it reflect the opinions of Next Capital Management. Any opinions represented in the show are Frazer’s individually and not an endorsement of the guest. This podcast is for educational and entertainment purposes. It is neither investment, legal, nor tax advice and does not represent the opinions of any employers of the host or guest.”

Crisis Management in the Wealth Space Lawyers, Accountants, Wealth Advisers and other advisers – are used to dealing with difficult situations all at the heart of their specialty.  But often, the advice the clients need goes past the wealth arena . . . . How do you help them when you hear situations like this? My son shows no drive and won’t get up from bed- My daughter is cutting herself- My brother just got his second DUI this year and is running the business into the ground- The trustee of my trust has missed filing taxes and is making mistakes- What do you do when you are the first point of contact, but out of your expertise?  What happens when the family is in crisis and devastating wealth impacts are in view? What happens when it’s not in your business model or expertise to deal with this part of the family’s issues? How do you do the right thing by your client and yourself? JANE MINTZ is the person to help us deal with this gaping hole in the wealth management industry. Jane is an internationally respected pioneer who has spent 20 years working with individuals and families around crises related to addictive illness, mental health, and life concerns. Best known for her work as a concierge strategist guiding clinically complex individuals and their families through extraordinary challenges, she is also a noted thought leader, industry consultant, educator, and speaker who has garnered international recognition. Jane has extensive experience working with family businesses and private family wealth offices so that the dysfunctions of today do not destroy the legacies of tomorrow.   Jane is a Licensed Professional Counselor with multiple dimension training credentials in high acuity clinical clients. She is a Laurel School graduate (Cleveland, OH) with degrees from Washington University (St. Louis, MO) and John Carroll University (Cleveland, OH).  https://open.spotify.com/episode/6s4CX5W9qxMtXwRRbBOtUi?si=zvatryXoRUadZirFtJJO4w Outline Jane, in a couple of sentences, what do you do as Professional Counselor- How is your expertise applied to the wealth space? (Family Businesses and Wealth Offices/Trustees) Crisis What constitutes a crisis? What is the difference between a crisis and a mistake (or “growing pains”)? How does a financial advisor, coworker, wealth manager know when to intervene? What are we looking for signs and symptoms that someone needs help:   Misspending  Not showing up for appointments  Missed deadlines  Disruption in workplace  Missed work  Inability to participate in large planning matters  The Intersection of Being a “Fiduciary” and Getting a Client the Help They Need? What is a fiduciary relationship?  vs. Human Ethics? When do human ethics supersede fiduciary ethics?  How can a clinical strategist be a key collaborator in bridging the gap between the two?    What does a professional counselor do?   What happens when a client is introduced to to a Counselor?    What are reasonable expectations?  For the family? For the Adviser? What does progress look like?  How do you set up the structures for long term success? Where does the Adviser fit in that process? How do we stay in touch and how do listeners find you? JANEMINTZ.COM Books Mentioned . . . . https://www.amazon.com/Four-Agreements-Practical-Personal-Freedom/dp/1878424319  “Frazer Rice is an employee of Next Capital Management, LLC. This podcast is not investment, legal, or tax advice, nor does it reflect the opinions of Next Capital Management. Any opinions represented in the show are Frazer’s individually and not an endorsement of the guest.” https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

Why Do You Podcast? And How Does It Help in the Wealth/Law Space? Why do I do it? What’s involved?  How does it interact with your career? Should I do it? (YES- At least try it) How did you get started and how much does it cost? Do you make money on it? Is your ROI on the show different? Do you use it for research or marketing (or both)? Do you enjoy it? Two Advisor Podcast Experiences I thought I would have BRENT NELSON on the show, so we could trade our two podcasting experiences.  Brent is the host of the successful and entertaining Wealth and Law podcast and heavily involved in the wealth management space.  This is his second visit to the Wealth Actually Podcast. He is an ACTEC Fellow and a partner of the Tucson-based RIMON LAW FIRM and focuses on international and domestic estate planning. For those curious about the world of podcasting and where it can fit into your business or practice, this should be a useful listen from two people who have done it. I liked the idea of two people, who have demanding day jobs, describing their podcasting experiences and how they make it fit within a demanding schedule- Why we did it? Why do we continue to do it? What do you listen to and what did you take for inspiration? What’s your process? What started off poorly and has gotten better? How much time / resources / workflow does it take? What functions do you keep / what do you delegate? How do you measure success? How do you “monetize?” Business model? Advertising? What do you wish you had? Struggles with audience building- Weird stuff like music / disclaimers? The Wealth and Law Podcast: https://open.spotify.com/show/3bQK3jsLsacNqryQKQuSRG I am also adding this excellent primer on “HOW TO PODCAST” from my friend, Jason Cilo of Meeting House Productions- it goes into some depth on the “Who, What, Where, When, Why and How” of the process from a person who does an extremely professional job on his show. It is well researched and serves as an ode to his passions in the TV and Film world. Well worth the listen: FULL CAST AND CREW: HOW TO PODCAST https://open.spotify.com/show/1UTZzSo2oPXBxn94UrIjO1 Some of the Podcasts Mentioned: Errol Louis (“You Decide” NYS Political Podcast), Various Horror Podcasts, John Keim (Washington Commanders Beat Writer for ESPN), Full Cast and Crew, Infinite Loops, Penny Philips, Griffin Bridgers, Morgan Housel, Ritholtz Wealth’s stable of podcasts, Invest Like the Best with Patrick O’Shaughnessy https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/ “This podcast is for educational and entertainment purposes. It is neither investment, legal, nor tax advice and does not represent the opinions of the employers of the host or guest.”

In this episode, I recount my experience in taking the plunge and jumping from a stable, large bank job to swim in some different waters. “Funding the Pivot” was written a few years ago as I was doing the post-mortem on my post-book experience. I think the lessons I learned can help a lot of people. This format a bit of an experiment for me in non-interview podcasting- let me know what you think of it. The transcript of the essay is below- thanks for listening! Follow me on TWITTER LINKEDIN YOUTUBE and INSTAGRAM, Don’t forget to SUBSCRIBE/like/rate the show and feel free to send along to your friends. https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/ Funding The Pivot We live in a world where we are bombarded with advice to “follow your passion” and stories of people who wonder about the road not taken.  In fact, more people in their prime earning years are taking steps to fulfill their “dreams” before they reach the brass ring of retirement- a time normally associated with doing all of the things you didn’t have time to do. What happens when you aren’t close to retirement and want to make a career switch or start up a new business? What is realistic? How should you think about the risks so that you avoid a crippling financial decision? As clients and friends have come to me with this issue, I have taken my personal experience and some financial planning concepts to put structure around what can be a high risk, but high reward decision. The Assessment and the Plan Many of us daydream about a better tomorrow . . . better finances, more control of time, health and family happiness, a clearer path to professional or extracurricular achievement and establishing a legacy. These things don’t come without costs and the risk of failure. Therefore, you need a plan. The first step is to assess the situation at hand. Are you running from something or running to something? Do you have an idea that will change an industry (or the world)? Do you want to start a business (and the hell that being an entrepreneur can bring) or do you just want to enjoy the trappings of a well-oiled business machine (already put in place)?  For those making career decisions because of an unpleasant work environment, I would think twice about running headlong into entrepreneurism.  It is a long and lonely road.  You have to “really want it” and be prepared for sacrifice both personal and financial.  Can the same itches be scratched while being traditionally employed? If your current situation is dissatisfying, could the correct change be a move to a firm that is more in keeping with your goals and principles? I had a little of both in my life and used parts of the creative process, the entrepreneurial experience and a corporate situation to move my situation ahead. My situation at my previous employer was suffocating.  I enjoyed working with clients, solving problems, identifying opportunities and being relevant to successful people. However, while enjoying success, I was not participating in the equity or direction of the business and I was not developing.  My career trajectory was flattening and the principles by which I worked were shifted by new management priorities. It was time to go no matter what. I also had a nagging feeling that I had more to bring to my clients, my firm, the industry . . . and myself.  I became involved in podcasting and speaking- two things that I enjoyed.  On the strength of that and my extracurricular interest in writing screenplays and essays, I felt like I had a book in me. Change is good, right? Change brings growth. Generally speaking, that’s true, but change also occurs when you are laid off or when a company closes down. To that end, change is effective when you are the architect of the change. When you are driving new circumstances, you have more control over its effects. In my case, I spent a year writing the book, finding a publisher and getting ready to be an author. I had the collateral to be something more than a job description. This leads to an important question. What Does Success Look Like? It is important for anyone making the pivot to understand what their definition of success is. For almost everyone, this will be an evolution. Ask yourself if you have the talent and the drive to make your new endeavor your life’s work. Am I a writer? In my case, the book was originally going to be TV pilot filled with smart, funny stories and I had over 200 pages of notes. I had written a variety of blog posts that were well-received and had a lot of other positive feedback. I thought I could make a go of it. Am I an entrepreneur? I looked around and saw that my path to success either as an author or in the world of TV was going to be a long shot at best. I spent long hours talking to my publisher and others about what success for my “outside endeavor” was going to look like. Early on (and fortunately), I was disabused of the idea that I was going to be the next Michael Lewis. The structure of the industry made the likelihood of success remote, especially at my stage of life. Making a huge life change on the narrow definition of being a (highly paid) writer/media personality was going to be an enormous risk. Could I turn a talent into something else? My thinking changed. The return on investment was going to be in the form of a major personal Everest climbed and of a new career trajectory, both wider and more upwardly sloping.  I changed the direction of the book from wickedly funny entertainment to intelligent decision-making for the one-percent, an area where I had significant professional experience and where I could make a meaningful difference to people (and their advisors) who need help. I encourage everyone looking to make the pivot to: Speak to others in the field and determine potential realistic results and Write down what their success will look like. This leads to the next question. Do you have the tools and resources to achieve your goal? (The Pivot Fund) Whether starting a business, finding a new job, or embarking on a new adventure, you have to find a way to land the plane back on the carrier safely. Financial and career stress can create a difficult decision-making environment and can have devastating effects one’s family and personal legacy. The first way to mitigate this risk is by taking an inventory of the tools and resources you have at your disposal. Step #1: Be confident that you have the talent to be successful- if you aren’t 7 feet tall, you probably aren’t going to be an NBA center, no matter how good your hook shot is.  Talk widely and broadly to people in the field to get an honest appraisal of your skills. Do things in your new field in bite-sized measures to make sure you enjoy the process. Find a mentor to help you learn the ropes and then a sponsor to give you the push your career will need (these may not be the same people). Join industry groups to get engrained in the culture.Beware: One of the most common pitfalls I see occurs when people assume that success in their current field will automatically translate into a different one.  Investment banking does not guarantee success in venture capital. Being successful in the public sector does not make someone a great businessperson. Being a TV star doesn’t necessarily make one a great author. Step #2: Explain what you want to do with your family and other interested people. You need to have family buy-in when you are financially responsible for them. Without their understanding, the distance between former financial stability and the current uncertainty of success could destroy your project.  Real life is expensive: mortgages, educations, healthcare etc . . . you should not undertake a pivot without deep consideration of these expenses. Communication is vital in keeping your support structure behind you and it will help your team make your pivot a bigger success. Step #3: Determine the important constituencies affected by your decision. This is directed at your employers, customers, community members etc . . . To those that matter to you, their understanding is important as you take on the stress of going through this new challenge. This process is also useful in establishing your allies as you embark on your new adventure. Step #4: Establish your anchor tenant. To go out on your own naked is scary and dangerous. In a new business, having the anchor tenant can be the difference between success and failure. Having an established customer(s) or constituency interested in your success will help get your endeavor off the launch pad and bring instant credibility to your efforts. Step #5: Plan your time for the first year . . . In detail. A huge issue for retirees is understanding what to do with all of the new unstructured time. For many it leads to aimlessness and depression. The same applies to people making a big pivot. You will have a huge surge of energy when your project lifts off. However, momentum is a fragile commodity. Once you settle in and become accustomed to an unstructured situation, uncertainty and procrastination can be dangerous enemies. What are you going to do the first month? The second month? The third month? The sixth month? Then a year out? The more structure you have in place, the more chance you can keep the momentum of your project going until it fuels its own success. Additionally, from my experience, however long you think it will take to get your project moving, double it. Step #6: Establish the Pivot fund. The start of any new project has to be done in conjunction with the financial resources at hand. One should detail the assets and liabilities of one’s financial position in detail. What have you got, what are your family’s costs and what is necessary to make your pivot happen? As discussed, a frank conversation with your family and other important parties is important.  If there is any backward move in your family’s lifestyle or breached commitments to others as a result of your initiative, those interested parties need to know upfront. Otherwise, your curiosity may be interpreted as selfish. As a matter of experience, I put aside a year of living expenses and dollars related to my pivot- I would have been happier if I put aside two years. Step #7:  Protect Your Assets.  So far, our discussion has baked in the notion that your pivot will be wildly successful.  What if it collapses? What if you get sued? What if you file your taxes incorrectly? It is worth getting proper legal and accounting advice to make sure that you are structured properly and following the forms and functions required. Don’t forget to get the opinion of insurance carriers to make sure that you are covered in the event of a catastrophe in your new project.  A lawsuit could be crippling in a new initiative. What happens if you don’t make it? There is always the risk that trying something new will end in failure. That’s why they call it risk. Here are a few that you should be aware of as you go forward. Reputational Risk– I think if you have communicated with the people that are important to you, most of the reputational risk is illusory.  Fortune favors the bold. As long as your decision is considered and your conduct is above board, very few people will hold your decision to try something new against you. In fact, I think it adds an element to a career if you are willing to invest in yourself and take a risk. Career Risk (Re-Entry)- This is a bit trickier, but manageable with planning. Traditional corporations abhor change . . . until it shines a light on something that they can capitalize on. That said, the higher up the ladder you go, the fewer positions that are available. Absence from a traditional track can be seen as disinterest or distraction by some. My suggestion is to have an in depth understanding of your financial requirements and a heightened self-awareness of your career path, your age and where you fit into the traditional model. Maintain the lines of communication into the traditional career ecosystem. If the decision-makers understand the context of your path ahead any discussions, the objections should melt away. If you are able to add a modern toolkit to an industry that needs it, your value will be enhanced if you re-enter your industry. This aligns closely with Step #6 and understanding the role of career risk in the decision-making process. By prioritizing the issues that the pivot is meant to address and establishing the criteria and likelihood of success, you can better ascertain your financial risk. Taking a serious look at your liabilities, how you are going to fund them and the time requirements of your new venture are vital. After taking all this into account, setting aside a buffer of cash and building a conservative financial safety net should mitigate the risk of a major pivot. The Purpose of the Pivot American poet, John Greenleaf Whittier wrote “Of all sad words of tongue or pen, the saddest are these, ˜It might have been.”  In a world where we are all encouraged to live our best lives, it is not wrong to direct the sacrifice and hard work we use to accomplish our financial goals in a direction that maximizes out talents and enjoyment.  It isn’t easy or else everyone would do it. However, well-considered and well-funded pivot can be the key that unlocks our potential and helps us accomplish our goals for our family and ourselves. Disclosure: Frazer Rice is an employee of Next Capital Management, LLC. This podcast is not investment, legal, or tax advice, nor does it reflect the opinions of Next Capital Management. Any opinions represented in the show are Frazer’s or the guest’s individually.