Every American Building Wealth NEEDS to Know The Trifecta - 10 Reasons Why

Everyone, I want to take a few minutes and teach you about what I think is the most revolutionary way to organize your tax, legal and personal matters. It's called the trifecta. Check this out. Now, some of you may already know this, but I want to introduce myself on why I feel qualified to talk about the trifecta. Because it's really bringing together several multiple pieces of our personal and business lives into one structure. I'm a cpa, an attorney, an author. I've been podcasting and blogging for years. I'm also an entrepreneur. I've always had a small business. I had a lemonade stand as a kid. I also own rental real estate. I'm a partner, minority as well as a majority partner in different businesses because of this life experience. And although many of you think, hey, this guy's a millennial, how much does he really know? I know I look young, but I'm really. Okay, that was a joke too. But the point is, this life experience has allowed me to create this, diagram this trifecta type of organization over time and fine tune it not only for myself, but for thousands of clients. Throughout the writing and speaking I've done over the years, all of our attorneys and CPAs and our firms teach this concept. And I think you're going to love it. So let me break it down quite quickly now, as I diagram this out, I'm going to visually represent it and then I'm going to give you 10 reasons why you should implement the trifecta. And it will be a benefit to you. The foundation starts with your Revocable Living Trust. Revokeable Living Trust. Now, this revocable Living trust, oftentimes known as rlt, is the foundation that's going to own all of your assets. Also at our foundation is our 1040 tax return joint, married, single, head of household, doesn't matter. And the reason why I put this here, as well as your personal bank account, is because water runs downhill. Money flows down into this structure. This is your foundation that's going to hold your trifecta as we start to split your life into two sides. So the foundation is the first piece of this trifecta. And all of your wealth, your money, your ownership, flows down into your 1040 tax return or personal bank account. Okay, so what's on the left side? The left side is your operations, your short term income, your ordinary income is anything that happens within less than 12 months. Think of a fix and flip or a rehab, or if you're selling a product or service throughout the day, it's something that's transactional, it's operations and it's ordinary income. Now I'm going to further divide this into three pieces. But this left side is your. In fact, I'm going to erase that because I don't want to go there dividing it up further. Let's keep it simple at this point. Now the right side is our asset side. It's the long term side. Things we're going to hold for longer than 12 months. This is going to be passive income related to our assets. All right? Now, in a simple way, this is where you would think of. Here's the restaurant, here's the building. So over here I have my rental income. Over here I have my operations. And so this might be an S corp, which is typical. Now hang tight. Some of you are like, I don't need an S corp. Gotcha. We're going to break it down into some other options here. But this will hopefully quickly explain the trifecta. My S corp is creating income and paying me a living wage or a draw or distribution. Whole other topic. But my trust owns my S corp. The LLC holds my rental income or investment income and, and the rental is owned through an LLC which is owned by my trust. So I've got this trifecta. I've got my operations here, holdings here trust. At the bottom. Boom, boom, boom. If I'm a realtor, this is my 1099 realtor income. This is my rental. If I'm an engineer, this is my S corp for consulting. Here's my duplex, here's my trust. If I just have rental property and no S corp, that's okay because over here we're going to bring in another piece and that's your day job. Your W2 day job is part of the operational side. Not everybody has a full time entrepreneurship business, a rental income and a foundation that owns all these different entities. It's okay. We can build the trifecta over time, but we have a visual representation that gives us a roadmap. It helps us build our wealth and organize it for 10 important reasons. Now before I go further and divide this up into its pieces and parts, let me erase these two sections to really further exemplify the power of this as you build your future wealth. So to provide a little more detail, I'm going to divide the left side into three pieces, the right side into three pieces. All right, so over here I'm going to have on the left side a day job. Some you may be single with a day job and a side hustle. One in three Americans now have a side hustle to make ends meet and also have started on the gateway drug to entrepreneurship. A side hustle is a great way to make some extra money and something to fall back on if we lose our day job due to a worldwide pandemic. Hello. So side hustle is a good thing which may start out as a simple little LLC or sole proprietorship, but this LLC is owned by our trust. The day job may be me or my spouse or both of us. And this is helping give us income to survive and pay the bills and to cover our monthly nut all the expenses we have so we can then use this money to to go invest in other assets. If our side hustle takes off and some of you may already be there, you might have a full time business, a full time operational S corporation. Any client of mine that's making more than 50 grand a year in a small business is going to be an S Corp. No if, ands or buts. I don't care if it's California to Delaware to Florida to Alaska. We're going to look at an S corp. Watch some of my other videos on that. So the S Corp which could be an LLC taxed as an S corp. So this LLC might evolve. This S corp is going to be owned by my trust. Now other videos and sections of my books and writings talk about partnerships that might be LLC that flow into my S Corp. So this S corp is a parent company where it's going to be our brand or our trademark for building wealth in a public way. But on the asset side, I don't may not want people to know what the name of my entity is because I'm going to start bringing in privacy and I might have LLC that are built for rental properties with after tax money. I've already paid taxes and I'm going to move money from my operations side to build wealth over here into little rental properties or maybe investment accounts, brokerage accounts, crypto, gold, silver, who knows what. These are my investments that I can live off the income if I want. But do you own these llc? Is it your name on the brokerage accounts? Nope. It is your trust. I want the trust to own all of your assets here as if anything happens to you. All the crossroads lead down into. Boy, that looks ugly. I got to clean that up. Let's clean that up a little bit. What? This will look pretty. This is a work of art when anybody meets with our attorneys at our office, even for a simple estate plan. We're going to build you a Diagram so every year we can review it together and go through. I want you to share this with your insurance agents, your accountants, your financial advisors, your family and your. All these little investment entities or LLCs are going to be owned by your trust. Now what's this big blank area over here? This is your tax free or pre tax section. And this is going to be stuff like a group 401k that you might have at work. And so this day job may be over here and you're contributing and doing a match into your group 401k, but it doesn't end there. I want everybody to have maybe an hsa, certainly a Roth ira. Maybe one for you, your spouse, your kids, your mom, your dad. Maybe we're going to do a Coverdell for a niece and nephew or a child of yours. A Coverdell is an educational IRA and we may even set up what's called a solo 401. If you don't have other employees in your S corp and you're the only W2 employee that's full time, we might be funding a solo 401k. You can do all these. You can have a group 401k, a solo 401k, a Roth, an HSA at any income level. That's right. We're going to take a multifaceted approach of building up these buckets so we can live tax free as much as possible in our lives. So what's the last piece here? Now of course, look at all these retirement accounts. The beneficiaries, your spouse, and then your trust over here. The trust is also going to own your home, the rv, the motorcycles, the toys, the ranch, the farm, anything that's an asset over here that you're going to keep throughout the rest of your life or for a few years and then upgrade. And it's not income producing, it may be wealth building, but it's there as a personal asset. And this land or this home of yours is going to be owned by your trust. Now if there's asset protection needs or there's income producing going on, we're going to move it up to this section of after tax investing. So I'm going to put investments. Well, anyway, this my friends, is the trifecta. Isn't this cool? Alright, now I want to give you my 10 reasons why this is awesome. Number one, asset protection. I want a firewall right here down the middle. I want this to be shell entities, creating income, paying the bills and keeping enough in the bank account for cash flow purposes to run the business. And then Out. I'm going to move that money down to my personal bank account or I'm going to move it over here and invest. I want to be building rental properties, investment accounts, paying off my home. Maybe I have some toys, some land, a farm, a beach house, a second home, a cabin, who knows what. And then here are my retirement accounts that I'm going to be building up as well in a tax free format as much as possible. And what I love, the Mega backdoor, Roth, the Roth, all those structures. So number one is asset protection. Number two is tax planning. See, this side is ordinary income. This tax, this income on this side is going to get taxed and at the highest levels or the highest rates. And so I want to keep income over here and maximize my write offs and keep passive income or tax free income over here. By having it in buckets or in different areas I can save taxes and do more specific targeted tax planning. Number three, audit protection. A lot of people say, well all these entities and all this, I'm going to get audited. No, you actually reduce your chances of an audit. 90% of audits are very targeted in nature. They're going to audit this entity or this company or this account or this piece of your 1040 and they're going to look at something that's out of whack. They're not going to audit all these other pieces unless they smell blood in the water for some crazy reason. So by actually having more entities and different structures going on, you're separating assets and income from an audit risk of all being in the same bucket. So I've got to love that. I want audit protection. Number four is we're defining bookkeeping. I love to have clear bookkeeping and money movement. I'm going to put this in red. Someone asked the other day, well, how do I get money from this side over here or how do I get money from over here over here? Guys, this is a beautiful way to stay organized because money can move around in different ways. I like this analogy of a, of a bedroom with no chest of drawers. If you try to just organize all your socks and underwear and jeans and T shirts on the floor, it's going to be a disaster. Some people go, well, all these bank accounts is a mess. No, it sets you free. All the organization of having these different bank accounts. So if I'm making money in my side hustle, I can move that money down to my personal bank account and then my personal bank account could do home improvements. I can take money from my S corp and immediately fund a Solo 401k or a Roth or an HSA, which would be different accounts. I may even take this S Corp and drive money down into my personal account and move it back over here to fund an LLC for a rental property or a brokerage account or a wallet to buy cryptocurrency or hold another structure for gold or silver or something. And what's cool here is all these different accounts would maybe have their own bank account in an LLC where I can do self directing so I can actually have checkbook control of my different retirement accounts to invest in what I know best. So I love the bookkeeping as a benefit. Next. And I wrote these down in a podcast that we did, Matt Sorenson and I. So I've got a link here in an art to an article and a podcast where you might be able to enjoy more discussion or elaboration on this trifecta. The next one is performance evaluation. By having operations in different buckets, I can better evaluate their performance, their success. Am I losing money here? Making money here? If everything's in one big bucket or disorganized, it's hard to make sense of anything and to make management decisions and wealth building decisions. Next. I want to look at relieving stress and providing organization. A lot of people think, oh, Mark, that just looks stressful to me. It looks less stressful because I want you to feel like you can get on your app at your bank and look at all the accounts. I can do performance analysis. I can feel more comfortable that I have better asset protection, better tax planning, less audit risk. And so a structure like this should actually set you free. Rather than making you feel overwhelmed with complexity, organization will set you free. The next thing is estate planning because someday you're going to die. Someday you might be in a car accident, someone may have to make health care or financial decisions for you. But if you're six feet under, I want all of your assets own by a trust that defines where they go. And some of you go, well, I don't have a lot of wealth. Do you have life insurance? Do you have a hsa? Do you have an ira? Do you have a retirement account? Do you have a side hustle? You've got stuff. Who's gonna get it? Your brother, your sister, your mom, dad, niece, nephew, spouse? Sometimes people are like, well, I don't have much and I'm single. That's the biggest concern. Like, where is the stuff gonna go? That little life insurance policy that you have at work, where's it go? It's Going to be go through probate. It could go through court. We want to create some organization so you leave a legacy. And that's where the estate planning structure comes in. We have an estate plan special every year. We're right in the middle of it now at Memorial Day. If you're watching this video later in the year, our prices are some of the best in the country to just get organized to have a will, trust, powers of attorney all in a binder with your color diagram on top of. We're going to build a little diagram for you with your estate plan. So check out. We're at 1500 bucks for any person, married or single in any state with a well organized estate plan and a consult with an attorney. I just throw that out so you can price check and go out and find someone else that can bring it all together. That's great, but just get it done. The next piece is privacy. I love the reason of privacy because what I can use is a revocable living trust that doesn't have my name in it. Blue Sky Trust, Green Tree Trust, Blue Ocean Trust, Blue Horseshoe, Purple Rain, what call it Go with some fun names and name your trust so that when people go on public record to see who owns these entities or this property or your home, your name doesn't pop up. We want to try to create as much privacy as we can. Depending on what jurisdiction, what state, there's some strategies that go that could be a little different based on where you live in the country. I also am going to use privacy for naming. My LLC is over here, but have very public trademark naming. Over here. I have Mark J. Kohler, Inc. Look it up, find me. I got great stuff. I want to sell it to you. I want to help you. I want to teach you. But over here, good luck finding my rental properties or my land or my assets. So I'm going to use privacy wherever possible, even mail forwarding where my personal address isn't out in public domain number nine, understanding and clarity. I've had clients that are just getting started in life and some that are worth $10 million or more. And they come after a meeting of just an hour, just an hour. We build a diagram and they go, oh my gosh, this makes so much sense. I've been. Where have you been, Mark? Where's your team been? I've been trying to get an understanding of my future plans, my organization, my bookkeeping, my structure. Hell, I've just been lost. Even though I've been building stuff, it's just in a drawer. I Want to get it out and build that erector set so I have something to look at that makes sense. And number 10. Number 10 reason to build a trifecta and a diagram for yourself and review it every year is to save money. Think of all the money you're going to save, not having to re explain your mess to every new accountant you meet with, every new insurance agent, every lawyer, every financial advisor, your family, your loved ones that I want on a board of directors in your entities so that you can get help and pass on literacy, financial literacy, to your family and loved ones. Even if it's just that best friend of yours and you got a lifelong relationship with someone, show them what you're doing, they can pick up the baton and keep running if something happens to you. And all of that saves money. When it's organized, you don't have to pay people for more time. You're not going to set up entities you don't need. You're going to be much more targeted in your decision making because you have a structure. In summary, take the time to build a structure that you can build upon. Once it's done, you can carry it with you everywhere you go. I've got my diagram right here in my annual planner. I carry around my Mark Kohler monthly planner with my Strat plan, my business plan, my calendar. I'm not going to show you my plan. Someone will take a picture and. But it's private. It's a way that I feel like I'm making progress and it inspires me. That could be one of these other 10 reasons it gives me a plan for the future. So no matter who you work with, whatever professional you may be a professional yourself in these types of areas, sit down and take the time to do this for you, for your clients, for your loved ones, and build a trifecta that will help you build that structure to better live your American dream. Thanks.