The time has come. You have made the decision and you feel good about it. Years of effort, work, time, and money have been invested into building a thriving practice. And now it’s time to sell.
- What do you do?
- How do you get started?
- What is the best way to sell in order to avoid as many fees as possible, capital gains and others?
That’s the topic of our show today. We are joined by capital gains expert, Brett Swarts, who shares exactly how to avoid those staggering fees when selling your practice, and ultimately put 30-50% more back in your pocket.
So…if you are:
- nearing the end of your career
- looking to make a change to something new
- frustrated with your business partners over direction of the practice and need a way to settle things on good terms for everyone
- or simply want to be prepared now for the future…
…then you will love this episode!
About Brett Swarts
Brett Swarts is the founder of Capital Gains Tax Solutions and is one of the leading capital gains experts in the country. Each year, he helps hundreds of business professionals with the proper tools that enable them to retain as much money as possible when selling their business.
Capital Gains Tax Solutions Website
Capital Gains Tax Solutions Facebook Page
Brett Swarts Linkedin
Capital Gains Tax Solutions BiggerPockets Page
Capital Gains Tax Solutions Youtube Page
#deferredsalestrust #lesstaxmorewealth #capgainstaxshow
#deferredsalestrust #SaveFailed1031exchange
Full Transcript
Intro (00:00):
What do you get when you combine simplified practice marketing, proven ROI strategy, and Vans skate shoes?You get Mark Thackeray, of course. So lace up, grab your green smoothie and get ready because this is Dental Marketing Secrets and this is Mark.
Mark Thackeray (00:21):
All right, my friends, welcome back to another episode of the Dental Marketing Secrets Podcast where we provide actionable tips and tricks that you can take and apply immediately to grow your practice so that you can serve more patients and ultimately leave a greater impact because that is what it’s all about. My friends, my name is Mark Thackeray and I am so excited to be here with you today. I’m looking outside and it is beautiful. I have a nice sweeping view of the Wasatch mountains. They’re snow-capped at this time. I’ve been up there a couple of times in the last two times last week and a couple of times the week before and we’ve just had a tremendous winter. So it’s another great day. I’m excited because I’ve got a very special guest with me today. And it’s cool because it’s a little bit different content or topic that we’ve been talking about that we’ll talk about today.
Mark Thackeray (01:13):
It’s a little different than what we’ve done on the show before, but I think it’ll make sense once we get into it and you’ll see the importance of itas we dive deeper into the topic. So I’ve got, Brett Swartz is our special guest for today and Brett is the founder of capital gains tax solutions. He’s actually a man of, of men, a man of action. He’s doing a lot of great things right now. He, each year he equips hundreds of business professionals with the deferred sales trust tool to help their high net worth clients, solve capital gains, tax deferral limitations when selling their highly appreciated business or real estate. And that’s really one of the things we’re going to talk about is, is how to best prepare for selling the practice down the road to avoid any of those, fees, for capital gains tax and really how to best, how to best do that.
Mark Thackeray (02:02):
So we’re gonna get into that. But Brett also, has a number of other things going on. He’s got a, he’s considered one of the most well rounded capital gains tax deferral experts on the West coast. His audiences are challenged to lean into multiple caps, capital gains, tax deferral strategies to create and develop a tax deferred passive cashflow, optimal timing wealth plan, and to execute on this plan so they can create and preserve more wealth. That’s really what it comes down to really, right. As is you’re all about helping them create and preserve more wealth for them and their families. And Brett is a, he lives in Roseville, California with his wife Melanie. And their five children at Brett has four girls and one boy. And I have four girls. So we kinda hit it off before that. But Brett, how are you doing today?
Brett Swarts (02:50):
Hey far better than I deserve. Thanks so much for having me on the show.
Mark Thackeray (02:54):
Yeah, you bet. You bet. So we’re excited. I really am very excited about this topic because it’s one that I personally don’t know a ton about and so I’m very anxious to learn from you. I’ve got my pan, I’ve got my paper. I’m going to take some notes as we go through this, but I also think it’s going to be tremendously beneficial to a lot of our listeners. Not all of them are at that stage where they’re ready to maybe sell the practice, but I know they’re all looking down the road at that moment when they can, you know? And that’s really kind of how I see how this, this topic fits into what, you know, this underneath the marketing umbrella or really how marketing fits underneath that umbrella, I guess is probably a better way to say it. Because the way I look at it, all of your marketing is going to lead up to that point.
Mark Thackeray (03:37):
You know, you’re trying to build this, this business, this practice so that if you so choose to, you can sell it for your retirement or you can go into, you can decide to maybe switch career paths and do something different. I’ve seen a lot of different scenarios, but that’s the way I kind of see it. But from your point of view, talk to us about that. You know what I mean? What, w when you’re talking with someone like a dentist for example, what you feel like they need to know, and I kinda wanted to start with this, but what do you think they need to know most about about capital gains, about retirement and how, you know, maybe selling that practice down the road?
Brett Swarts (04:18):
Yeah, great, great question. The way we like to put it, as you know, most dentists, orthodontists, scenarios, optometrists, and you’re really professional practice owners, business owners, commercial real estate owners, high end primary homeowners. They struggle with capital D are 30 to 50% of their, of their gain when they sell these highly appreciated assets. And we use a deferred sales trust as the tool to give them tax deferral, the diversification so that they can create and preserve more wealth. And it’s just really bottom line, the mathematics makes sense. In fact, it’s somewhere between 30 and 50% again of their gains. So if any of your listeners are selling their practice for let’s say a million or more, and a lot of them will have a zero basis, they’re looking at a large large capital gains tax. You’re really just getting paid if their largest expense that they’re probably going to ever face in their lifetime with their largest transactions, they’re never probably going to do in their lifetime.
Brett Swarts (05:18):
And there’s an opportunity here to do some planning so that they don’t have to pay that immediately. They can actually defer it and then live off the interest for as long as they want and pass it on to their kids. Grandkids. Also fun charitable organizations if they want to, but they don’t have to also that, really so the government isn’t take the money and wasted away. And really it stays in our families and our communities. And some of the stats behind this. According to the American bankers association, there’s about $17 trillion that will pass from one generation to the next and the next 20 years. And this is the largest wealth transfer in the history of the planet that we know of. In fact, this is by the baby boomers and there’s about 70 million in the U S alone about 77 million actually. And every single day, about 10,000 of them are turning 65.
Brett Swarts (06:05):
And so they feel really pressured and trapped and oftentimes forced to not sell because of this capital gains tax of 30 to 50% of their gain going to be wiped out. And, and yet they, they, they, they have, they have, you know, goals and aspirations to have passive income stream goals and aspirations to retire goals and aspirations. We don’t, with the toilets to trash the liability, you know, they’ve earned all of this wealth. And now how do they transition to the next phase of life without again, getting hammered by that 30 to 50% in capital gains tax.
Mark Thackeray (06:38):
Yeah. And that’s really the big question that most of them have. And how, in your experience when talking with professionals like dentists or orthodontists or optometrists, how many of them, what percentage of them are, have already learned about the different tax deferral strategies? Or is it very, it’s gotta be very small I imagine, right?
Brett Swarts (07:00):
Yeah. About, about, you know, I don’t know, maybe five or 10% or maybe their CPA has kind of mentioned it to them. The biggest thing is to professionals that we work with, such as dentists and veterinarians and optometrists and such. They’re so focused and they’re such a specialist in their craft, right? That is what they know, that is their passion is helping people and growing their business and being a great, great part of the community. And so the selling part is a whole nother specialty where they have a business broker, but on top of that, it’s the CPA who helps with, you know, doing the tax returns. But on the, the really the nuance here is it’s another level of expertise and that’s where we come in with the actual tax deferral on the sale of the practice, which is sort of like, if you think about it, if you go to a general doctor, you can get general blood work and they may be a general practitioner, but there’s certain folks who do a knee surgery or a brain surgery, right? Or, you know, different parts of the body have different specialists. And that’s really the key here is making sure you’re hiring that specialist, defining what your problem is and making sure you have someone who’s, who’s save people, help people, right. overcome that challenge.
Mark Thackeray (08:08):
That’s cool. That’s awesome. So you, I imagine it sounds like you work with a lot of CPAs then because you, you’re not necessarily competing with them, you’re just a specialist in this tax deferral, you know, capital gains, tax referral strategies, right?
Brett Swarts (08:21):
Correct. Yeah. We actually want to bring in their trusted advisors. We have thousands of pro visits professionals across the U S who’ve actually joined us as a way to educate and help themselves grow their business. So they have their own businesses and they join as a member with us as a way to market and educate their clients because of this huge need. So yes, we actually invite the CPA Vite the financial advisor and invite whoever in to learn about this strategy and then, you know, VAD us and ask us the tough questions and then decide if they want to move forward with, with the strategy.
Mark Thackeray (08:54):
Got it, got it. That’s cool. That’s cool. So tell me to Brett, walk us through, how did you get to this point? How did you get to, to becoming and building, you know, capital gains tax solutions to becoming an expert in this field? What was that process like? What was that journey like for you?
Brett Swarts (09:09):
Absolutely. Thanks for asking. It’s kind of the, I call it the origin story of the back story. You know, he started out at Marcus and Millichap, which is an investment real estate firm and across the nation, it’s one of the largest ones helping people buy and sell multifamily properties here in Northern California. And I started there in Oh six and I was, I was Oh six to 2011. I was there and I was trained. And during that time period we saw big transition. In fact, I was just kind of newly married, you know, big baby girl, really just trying to make it in the business and learning about, tax deferral strategies such as a 10 31 exchange. Maybe your listeners might know about that, where they buy and sell investment real estate to defer tax. And I was just trying to learn and add value to clients in a very competitive marketplace, you know, be able to provide for my family and be able to win when the marketplace in Oh eight hit, you know, really hit the ground.
Brett Swarts (10:00):
And when that happened, it’s really it, the way everyone kind of thought, especially about financial matters and trying to find ways to never have to go through that again for any friends or family or earning of our clients have to face that debt and all of that gain or losing all of that equity. And so along that journey kinda actually came across us, this I call a secret, a great secret that a lot of people just don’t know about, called a deferred sales trust. In fact, our manager brought in a gentleman who speak on who’s now my business partner and he spoke on this deferred sales trust strategy. And like most folks, I sat there going, why hasn’t my CPA told me, right, I’m in the investment real estate world. Why hasn’t anyone else told me about it? You know, why is it more, why aren’t more people doing these things?
Brett Swarts (10:44):
And so I like to say more of the tortoise and the hair and that I sort of, you know, poke poke the bear or poke the strategy and ask a lot of questions, but slowly got to learn from the CPAs. And tax journeys you created it and slowly start to send referrals. And my confidence grew more and more and more in the legality of it and how it worked and then the outcome that it had for, for clients, friends and family. And so fast forward about 10 years later, the marketplace is obviously appreciated a great deal. And, and with that I was able to say, you know what, there’s an opportunity to help business owners such as dentists or optometrists, right? Veterinarians who are selling their highly appreciated business because they don’t even qualify for a 10, 31 exchange. In fact, most of them just sell them, pay the tax and don’t know the difference. They may carry paper for a short term and defer for a little bit, but I found that there’s a real niche that this can fit. And so that launched the passion to go out and help a lot of people and, and, and create and preserve more wealth and use the strategy.
Mark Thackeray (11:43):
Yeah. So why don’t more people know about this?
Brett Swarts (11:47):
The easiest answer is cause they haven’t talked to us yet. You know, that’s the first answer. But, but we do have thousands of business professionals, national law firms, CPAs. the tax law itself goes back to the 1920s. It’s just known as an installment sale. And so your, your dentists, your, your, your people who are listening, who are dentists aren’t [inaudible] or listen to this podcast, they probably would know it more so as, as an installment sale, which is all, it’s all that it isn’t an installment sale. You can just carry paper and you become the bank and you defer the tax. Well, we’re just doing a little nuance in network. We’re adding a business trust to be able to do that. And then we’d take away a lot of the limitations for how it can be invested and where it can be invested. So they actually do know about the foundation of the structures. They just don’t know how to apply the law. That’s where the, I guess the secret sauce comes in and that’s a proprietary structure that we have folks sign an NDA and it also takes a team of professionals to execute this. And so after 24 years, collectively, thousands of closes, 14, no change, IRS audits it’s still one of the best kept secrets in that sense. But you know, we’re spreading the message as fast as we can.
Mark Thackeray (12:52):
Yeah. That’s awesome. That is awesome. So walk us through Brett for a minute. If you could share an experience that you’ve had with one of your clients to really help illustrate what this could mean, the type of financial impact it can have for someone who has built up a beautiful practice that is now looking to sell and maybe transition into retirement or transition into something else.
Brett Swarts (13:12):
Let me tell Peter story now. Peter is not a dentist and orthodontist, but I think it’ll, it’ll apply here and then it’ll shift into a veterinarian and some dentists who are doing it. But Peter’s a baby boomer and in fact he’s been in the commercial real estate world his whole life. He actually helps people buy and sell residential properties. And he’s owned commercial real estate for 30 years and he’s always done the traditional 10 31 exchanges. And he’s known about seller carry back. But about a year ago, he started, he found us and he started talking with us and he was looking at ways to defer tax on the sale of his 1.7 $5 million property in Sacramento. And his biggest thing is he was tired of the toilets, the traps, the liability. He was tired of, of new rent control laws. He was tired of evicting tenants.
Brett Swarts (13:55):
He was tired of just, he was running just to enjoy his wealth and he’s ready to retire and he has done multiple 10 31 exchanges, but he’s facing this $550,000 liability if he were to sell and not do a tax deferral strategy, he also has about another $500,000 in debt that he doesn’t want to have to have it. And he’s ready to be debt free. He’s ready to be diversified, have some liquidity, and so entered the deferred sales trust. It solved really three main issues for him. First of all was the obvious one, the tax deferral, right? You can say proud. I can keep an extra $500,000 when I sell my, my property, yes. Okay, I can pay off my debt. Yes, you can pay off your debt. I’m debt free and I don’t have to buy more properties. And I said, yes. He goes, Brett, I’ve been waiting for this for about 10 years.
Brett Swarts (14:38):
I would have liked to do this about 10 years ago, but I didn’t know about it. And I almost lost everything in the 2008 crisis because I had too much debt and the banks weren’t lending. I had equity beforehand. I ended up overpaying for a, so it was not good at that time. I held on and I was able to make it, but I don’t want to go through that all over again. And so his number one quote, I said, after you saw, what was the reason to use the deferred sales tress? He goes, Brett, I had 18 problems, 18 units. He goes, I didn’t want to trade it for 36 units, 36 problems. I’m ready to be retired. So, so he’s sold, he’s really happy, he’s debt free. He goes, Brent, I’ve never had so much time and energy just to travel with my wife and do whatever I want.
Brett Swarts (15:20):
I don’t have to drive to and from Marin, California to Sacramento and traffic. He goes, this is great. You know, and I want to spread the message to other folks. So that’s Peter’s story. And the, and the transformation came from really when he realized that, yeah, this is just a tax deferral strategy that people have used for 24 years. They faced the RS and, and one and I didn’t know about it, but now I do and I get it. And so that’s really the process. We want us to want to educate everybody and make sure they’re comfortable and then move forward. So that’s Peter story. The second one was a veterinarian up in Northern California who 30 years in the practice ready to retire, zero basis, and he’s selling his, selling his, his business for around $2 million. And so he’s looking at a substantial capital gains tax and depreciation recapture.
Brett Swarts (16:12):
So I think it was his, was around $900,000 or so in liability. So if he would’ve sold it 2 million, he was debt free, he could’ve had 1.1 or you can use the trust and have 2 million minus some fees and then live off of that interest. So for him it was a no brainer, sold his practice and, and sure enough, he, he’s really happy. In fact, the buyer who bought his practice, this is kinda the unique, unique part about this. Ended up having some health concerns about three years later and actually needed to sell it back. It was kind of a sad situation for that buyer, but they were looking for someone to buy it. And then meantime, the, the veterinarian kinda got, you know, had three years off, let’s retire this feeling good and got the call. And he’s like, well, I don’t know, maybe we’ll, if you give it to me before for a discount, I’ll buy it.
Brett Swarts (17:00):
And he was able to use his trust to buy back his business at a discount. it was a good thing for the, for the seller because he had, he had to get out and there was no other environment there and, and so it actually all tax deferred. So this is, that doesn’t happen very often and we don’t want that to happen. We want the buyer to be successful. But the buyer was really desperate, had a real health health need and needed to sell. But the point is he was, they were able to use the trust to buy it at a discount, which was also another way to, to add value because you can use the trust to buy real estate, which a lot of business owners such as dentists and orthodontists and veterinarians, they’re looking for ways to produce cash flow when they sell rather than than just the traditional stocks and bonds and mutual funds, which are great. You know, that’s what prayer’s doing. But for this particular client, he wanted a little more entrepreneurial type of opportunity, which the deferred sales trust provides.
Mark Thackeray (17:53):
Yeah, absolutely. That’s so cool. That’s an amazing, amazing, both of those stories are amazing, but the veterinarian one is in particular. That is, that’s powerful. You know? And so what for some of us that are listening to this and maybe hearing it for the first time and tried to take it all in and it almost sounds too good to be true. Like you’re just, eh, you know, it almost sounds unethical. Maybe they’re doing something shady to get past these, this legislation, these, these legality legal issues. What, what do you say in response to that?
Brett Swarts (18:23):
Yeah, we know. It seems like it’s too good to be true. Right? And that’s the same, same thing when I sat in the, the workshop about 11 years ago and heard this for the first time, it was the exact same feelings I have. So first of all, we totally understand that, but then you got to take your feelings and look at the evidence and the evidence is very, very clear. Literally thousands of closes, 24 year tracker and in 14 no change IRS audits. So let’s talk about some of the audit. By the way, if anyone ever comes to you with a new tax referral strategy, there’s, there’s basically seven questions you should, you should ask yourself, and we can put this in the show notes, have a video on this, but let’s just cover a few of them. Okay. The first question is, what’s the IRC tax code?
Brett Swarts (19:01):
And this one is IRC four 53 it’s known as an installment sale, goes back to the 1920s the next one is great. Well how long have you guys been doing it for? The answer is 24 years. The next question should be, well, how many of you close thousands of closes? Probably the most important question is, well, how many of those thousands of closes have your clients actually had an audit by the IRS and what was the outcome? The answer is 12 of those clients, the largest one happened to be a a hundred plus million dollar property in San Diego, California. And what was the outcome? All of them were no change audits, not one single issue with the trust. So the IRS knows who we are, they’ve seen our structure and basically what they say is you guys are just doing an installment sale and a little more little more macro view for installment sale for why the government allows these things.
Brett Swarts (19:50):
The government allows tax referral because they see it as a way to actually spur economic growth, which in turn creates more jobs, which in turn actually creates more tax revenue. It’s the same reason they [inaudible] the same reason they allow 10 31 exchanges and other you’ll say 401ks and different things like that because it’s actually going to produce growth in the stock market or growth in the business market, which is going to spread the economic growth. So that’s why they put these laws in place. Otherwise people wouldn’t either a sell their practices be if they sold their practices, they just put their money under their mattress and they wouldn’t actually invested into the economy. So there are a couple of rules we need to follow in order to keep tax to for all we need to keep the funds. in some kind of business purpose such as stocks, bonds, mutual funds such as, you know, another dentist practice.
Brett Swarts (20:39):
You can put it in with other dental groups who are, who are, you know, these big buying groups as your, as your listeners probably know are buying up and consolidating. And if you had a one you liked, you could invest with them alongside of them all tax-deferred. and that’s spurring economic growth, right? Which actually spurs more, more dollars. So those are the reasons the government actually likes these strategies. As long as they’re not being abused. And that’s the part where we come in where the team of expert advisors, along with the financial advisor, along with the tax attorneys working with your CPA as a team, we’re going to navigate this wealth plan for you. And as long as we stay within the guard rails then it works.
Mark Thackeray (21:18):
Yeah. Oh, that’s awesome. That is awesome. And yes, let’s definitely send me those questions to ask. We’ll post those up in the show notes. I think that’s a great resource for people to have because I know as, as, as a lot of our listeners get closer to that point where they’re looking at possibly selling the business, or doing something else and they’re going to want to take a look at that and take a close look at that and, and make a good decision when it comes to that. So for those, you know, so certainly talk to us to then, Brett, what would you say for those that maybe have, I don’t know, 10 15 years away, they’re 10 15 years out from, from retirement, are looking to sell the practice. what are they, what would you recommend that they start doing now? And then also additionally, for those that are closer to that retirement stage, are looking to do something with their practice, what would they do at this point? So talk to us about those two different scenarios and what your recommendations might be for each of those.
Brett Swarts (22:14):
Great question. So remember in the origin story, I talked about the 2008 crisis when everything crashed. And everyone basically kind of knew that Oh five Oh six Oh seven it was a seller’s market and things were high. It’s a lot like we feel right now, like things are really high. Values are way up and looking at that multiplier based upon your income that’s coming in for the practice, right? You may be able to, let’s say, say your practice right now for three or $4 million rather than waiting for the economy to shift in five years and that’s that same value. The multiplier could be lower and now it’s only worth two and a half. So the first thing to look at is, is there a way to sell your practice and capture the value in these highly, highly appreciated environment with very low interest rates and still do exactly what you love.
Brett Swarts (23:00):
But essentially you’re taking some chips off the table, right? Let’s say you cut that $4 million sale and you’re still working. We, we, you know, we work with some big, big groups that are buying these practices and essentially you can still be a part of the practice, still do what you’re doing, but you’re taking that 3 million, let’s say, of equity and you’re putting it into real estate. You’re putting it into maybe other dental practices or stocks, bonds, mutual. In other words, you’re diversifying outside of your one single practice, right? All of that equity and you’re capturing the value right now. So I would, so the first thing I would say is, do you have a wealth plan for how you’re going to retire and how, how, how, what does that look like? And does it make sense to sell today? Right? For example, we’re doing a ideal and for three a two dentists and one orthodontist and their partners and a very large, large, I think over 40 plus location sale, and they’re selling to a big, big, corporation group who buys these things in consolidates.
Brett Swarts (23:59):
And they’re, they’re looking at, and they’re in their early forties. So they’re, no by no means retiring. They still love what they do, but they’re capturing all this value right now and they’re selling and they’re going to, they’re also going to have some earn outs over the next year or two. But essentially because values are so, so high, they’re not waiting until the time when they’re 50 or 60 and want to retire. They’re taking advantage of what they’ve built right now, right? And Vince still working. And by the way, they can go start their own dental practice to later on if they want to with the funds. So realize that it’s not just, Oh, I’m not ready to retire. So I’m going to dismiss this actually. What is your overall wealth plan? And give us a chance to walk you through that. So, and then you decide what you want to do.
Brett Swarts (24:43):
So that’s number one. Now number two, for the one for the, for the, for the, you know, they say the baby boomer or someone who’s older and he’s looking to retire. Now we want to be early to the process. Meaning, if you think you’re going to be selling the next six, 12, 24 months, contact us today and let’s create this wealth plan so that nobody’s caught off guard and you can do all your due diligence. You can do all of all of the, all of the investigation now before you’re caught up in the actual deal and negotiating and all of the emotion that goes along with getting your practice sold. I mean, there’s a lot that goes into that and we don’t want to necessarily convolute the two. Now. We certainly do that, but sometimes it’s just a lot of stress. And we want to take the stress off of, of, of you the client, right?
Brett Swarts (25:27):
The dentist who’s selling. So just be early prepare plant. And here’s the neat part. We don’t charge anything for that, right? So we know we don’t get paid unless you do the deal. In fact, the tax attorneys we work with, the financial advisor, our team of capital gains tax solutions, there’s zero. Unless you close. And for whatever reason it doesn’t close, there’s still zero. We just want to make sure that you’re all prepared. Everything’s in place to execute this. by the way, sometimes it’s too late. And in other words, let’s say you’re selling a practice right now and you’re in escrow and they’ve removed all contingencies. Oh no, that’s too late. We get those calls sometimes where they say, Oh no, we’re closing in a week. Can you help me? And we’re saying, well, have you removed all contingencies? And they say, yeah, I don’t want to say, Oh, sorry, you know, that million dollars in tax we can’t do anything about. So the worst thing you can do is not take action right now. Connect with us. At least get this on your target and get the, the language that we can provide for you. If you, if you work with us so that you could, you can actually use this option.
Mark Thackeray (26:32):
Awesome, awesome. And that is such a tremendous resource just to know that you can come in and you’re essentially going to be their advocate regardless of what happens, whether or not they become, you know, it closes and you become an official client or anything like that, they’re going to walk away knowing, having a blueprint, having a game plan to know exactly what to do to achieve that wealth plan. So do you guys, do you guys help them with what defining what a wealth plan looks like as well? Or do they, is that something they need to come prepared with? Is that their homework but they need to come ready to class?
Brett Swarts (27:03):
I see. So we have some of the top wealth advisors literally in the world, you know, and, and have joined to use this, for the F four of the top leadership team for a group called PIMCO, which is one of the largest, fixed income managers in the world. They are, are part of a, kind of like our inner circle of, of, of advisors that they only have a few groups that they work with. And we’re one of those in the U S and so and which by the way gives another layer of, okay if those guys are saying yes to it and had their legal teams go through it cause another layer of okay they get their confidence in what they’re doing. By the way, the funds are held at TD Ameritrade, bank of New York Mellon, Charles Schwab’s and the largest banks in the world.
Brett Swarts (27:46):
The funds only move with your signature. You have all the rights and protections, 24, seven access to view the funds. All of these things are in place for your protection. But that being said, you have those wealth advisors and then M in my role and my expertise, my background is multifamily investment, real estate, commercial real estate. I invest in senior housing office, mixed use, multifamily, mobile home parks. You get another layer or another help if you want help with that. And then you have the tax attorneys who help with the tax rate. So basically it’s a team all around the client, all of our individual spaces, expertise that you’re getting as a part of this, which is really valuable because as you know, it’s not just a one transaction. It’s who’s going to help you along the way as you prepare for your state highs, you prepare for your retirement as you prepared for cash flowing assets and all of that entails. And that’s the absolute what we love to do. That’s our passion. And yeah. So I appreciate you asking that question.
Mark Thackeray (28:41):
Yeah, well, and it just, the more you talk about this bread, the more you to me, you know, and I’m, I’m kind of new to all of this, so the more, to me it seems like this is just a no brainer, you know? I mean, it just seems like such a, such a win, win situation, especially for someone in my position or someone who, who doesn’t really have the time to go out and invest to, to learn about all these different strategies that you can employ and all these different tactics and all that, but rather come to someone who has already built this amazing team of professionals that are here to serve you. So what, is there any reason why someone wouldn’t, would not come, it might not be a good fit for you guys? Is there a w who may, who is not a good fit, for you guys, would you say?
Brett Swarts (29:26):
Great, great question. So a couple things. If the tax liability is not large enough, then our fees eat up that savings. So our minimums are $500,000 or proceeds and $100,000 of tax liability deferred. Not to be with actual game, your game could be a 300,000 and of that you owe 100,000, that would be your liability, right? So 500,000 proceeds. So that’s net of all debt. Everything that you’re selling, 500 some minim 100,000 of liability. Our average deals about 2.6 million in actual equity and we’re deferring somewhere around four to $500,000 of liability. So the neat part is we, we, we, we get that up front right away. It’s the first thing we do. We just actually we have a DST calculator on our website. You answer 12 questions, it’s going to do a side by side comparison and we’re going to say, ah, it’s too small, sorry.
Brett Swarts (30:15):
Or yep, you absolutely are good fit. So that’s the first thing, making sure the liability is big enough as long as the liability is big enough and works. And why, why are those numbers? Well, we use the rule of 72. If you can earn 7% on any given amount over a 10 year period of time, that amount will double. Our average notes are about 8% return over any 10 year period. They go for 10 years and then you can renew, renew, renew. But essentially if imagine you just live off that interest payment or you let the interest compound, which, which what you can do that to in 10 years, let’s say you would have paid a million in tax new song, the $3 million practice and he had, you know, 3 million minus and fees. Now you’re almost, you’re basically at almost $6 million if you took no income or you just lived off the income.
Brett Swarts (30:57):
So it’s really just a mathematical equation. So that’s the first, that’s really the biggest thing. That’s the big, big domino. Is your tax big enough? If it is, that domino falls over and it makes sense. The second thing you want to ask too, again, this is kind of back to those first seven questions, is well what happens if I get audited? Right? Who’s going to pressure this big audit if it happens? First of all, we have a low audit risk. We’ve done thousands of closes and have a very low audit risk. But if you do get audited, the tax attorneys provide no additional costs, lifetime protection for the trust. They stand behind, they work their work. And that’s very important because you don’t want to be facing a, the IRS and, or having to pay these big legal battles and not have somebody who’s actually been with the IRS and has overcome those objections and has won those, those cases.
Brett Swarts (31:46):
So that is a, hopefully that answers the question there. Other than that honestly you maybe you want to pay down the $23 trillion of debt, you know, I mean, honestly at a certain point it’s sort of like, why would you give it to a government that, you know, both sides of the aisle are going to waste it away pretty quick. We’d rather keep it in our families and our communities give it to charity if you want to. Some of it all of it, you know, it’s flexible. Somebody might be 100% charitable inclined and if they’re 100% charitable inclined, they can use what’s called a CRT, which is a charitable remainder trust, which is a great strategy too if you’re 100% charitable claim. Most of our clients are definitely charitable inclined. They’re just not 100% right. We like the deferred sales trust. We like to say it’s the, it’s like the CRT with, but the C is not required, meaning you can give the charity but you don’t have to give it all of that away to charity. And a lot of our clients like that flexibility, meaning they can give it to multiple charities but they can also stop giving to certain charities if for some reason their values change and, and the, and the leadership changes at the charity and it’s in line with what they wanted. And so we liked that flexibility with the DST over the CRT. But really those would be the two that kind of come to mind.
Mark Thackeray (33:02):
Awesome. Awesome. Awesome. So I’m going to ask another question and this, this, can be a little sensitive for some people in that or they find themselves in this situation. So if they have, let’s say a partner or multiple partners and that partnership has taken a turn South how can, how can the DSC allow for a better transition, moving forward? Cause I’ve, I’ve read a little bit about that and I know you guys help with that as well. So talk to us a little bit about that.
Brett Swarts (33:32):
Great question. So the deferred sales trust by nature is a seamless partnership, separation opportunity. And let’s walk through what that means. So imagine it was me, Mark and two other partners and we owned a dental practice and let’s just say it was worth $4 million. We all had equal share and you know, and Mark and I want to keep working right? And the other two are ready to retire and now there’s this battle and they say, well if we sell, we’re going to pay, you know, $400,000 each in tax. And there’s this big, big battle on, basically what happens is it becomes a stalemate of those who want to sell and those who want to get out and all of these, all of these things and these big expenses. And that scenario, let’s just call 400 for each partner would be the tax liability, which is not good, right?
Brett Swarts (34:18):
So when you can put 400 back into everyone’s pocket upon sale one, the conversation gets a little bit easier, right? You, you start to come up with more, some more creative terms. But that being said, the neat part of the deferred sales trust is all four could have their own individual deferred sales trust that actually is seamless and separated from one another. The funds are no never commingled, completely separate based upon their own risk tolerance can be invested. However they like. That’s the first thing be you. We may find let’s say Mark to two other doctors or dentists that are ready to come in and buy and we don’t have to sell the entire entity. Just those two, you know, the a million and a million they could fill in and they could do their own DST. In other words, the whole entity doesn’t have to sell for this to happen.
Brett Swarts (35:04):
So we start to basically just define what do each partner want and would you like to have 400,000 extra and would you like it to be a seamless separation? And the deferred sales trust hits on every one of those points. And that’s why it’s, it’s great. So back to the dentists deal that’s closing here in about 60 days they have three dentists and they’re each going to have their own trust and it’s gonna it’s going to be invested based upon their own risk and their own cashflow needs. which is nice. So yeah, absolutely. I worked for partnerships and it works in a good way.
Mark Thackeray (35:41):
That’s awesome. Yeah. What did you, what a huge resource that could be. You know, cause I’ve personally talked with multiple, dentists that find themselves in that situation right now where one of them, like you said, exactly like you said, really where one of them is nearing the age of retirement. Couple others are still on board. They still want to be working and serving, treating patients for the next 10, 15 years. But they’ve come to an impasse really right now where they can’t figure out the next step forward because they don’t see a solution, you know? And so this, this is a, a tremendous opportunity for them to all essentially get what they want and, and leave on on much better terms than if they’re gonna, you know, try and do it for themselves. So that’s awesome. That’s awesome. So a couple of things before we wrap up. So I Brett, I know you have, cause I downloaded a copy, you have a guide essentially that talks about the capital gains tax, how you can save 30 to 50% of that, of that gain and not forfeit that. So tell us a little bit about that, where we can get it and then we’ll make sure to link that up in the show notes. but yeah, talk to us about that for a minute.
Brett Swarts (36:55):
Sure. Yeah. So you can go to capital gains tax solutions.com and you can also search to YouTube and you can also search LinkedIn to connect, connect with me. And then you can download the free guide, we call it the escape escape from feeling trapped by capital gains tax. And essentially this is going to give you the basic structure, basic overview of the basic why, the basic benefits of the deferred sales trust to really, it’s about five pages. It’s going to kind of give you an introduction to that and an introduction to our company and in my background and that’ll, that’ll help you get, get started there. we also have a podcast coming out here, it’s called capital gains tax solutions podcast and we’re going to have people from, you know, really all different walks of the financial industry that are talking about ways to create and preserve more wealth through real estate and also other tax referral strategies. And really the goal is just to bring clarity across some of the top main ones and then so that the listener, you know, if your listeners can decide what’s best for them.
Mark Thackeray (37:53):
Right, right. Awesome. Awesome. Kay. Well we’ll link that up in the show notes, make sure people can get access to that, which I think is awesome. I talk about it a lot on my, on the show where if you can educate people and provide some type of value upfront without any type of obligation on their part, it’s gonna. It just helps everyone, right? It raises all boats. It just helps people better understand what their options are. And more often than not, they’re going to make that better decision, you know? And it also helps weed out those, those companies, those businesses that might be cutting corners, might not be doing everything by the book and you know, legally and all that. So. So I think that’s awesome. Okay, so two more questions before we wrap this up. And one is an easy one and then one is more open ended. So the first one is what if you were to recommend any two books that you’ve read for, so recommend two books that others should read and why you recommend those. And then feel free to share any last thoughts that you feel might be beneficial for our listeners that we might not have touched on or that you just want to reemphasize.
Brett Swarts (38:57):
Absolutely. So I think the first one would be, I just kind of rereading it. It’s called crucial conversations and it’s an amazing book and a reminder of how to communicate in a way that you’re, you’re heard and the other person has heard. it talks about mirroring talks about, you know, stating your path. It talks about you know, really taking time for, an intense conversation that’s going to happen because these do make a big difference in our relationships and our relationships are them really to me that one of the most important things if not the most important thing we have with one another. So learning to communicate in a way that makes it safe, right? For everyone to be heard and to, to speak. So I love that book. Crucial conversations. I highly recommend that one. the second one if you, any religion just haven’t read it, would be rich dad, poor dad. You know, it’s a great book about the tale of two two dads and in a lot of your listeners are entrepreneurs and business owners, but it’s just a good reminder of, of ways to build wealth and in a way that’s very tax efficient. That is, it gives you freedom back for your time and your energy, right. By producing cash flowing assets. and so that’s a, that’s a neat one too. I would, I would check out and then what was your last question? I missed that one.
Mark Thackeray (40:18):
The last question is, yeah, any, let’s see. Anything that you would add to our conversation? Anything that you feel like we either left out or anything that you would like to reemphasize?
Brett Swarts (40:28):
Sure. the vehicle works, it’s legal. A, it’ll help you create and preserve more wealth, but also you can figure it out. You are smart or I, you are dentists. I like to say I’m just the nurse and, and, and, and the doctors and the dentists and the veterinarians, we help, they’re like the brain surgeons. In our scenario, the brain surgeon happens to be the law firm who created this and who actually does the surgeries. I’m just the nurse that takes the pulse. But essentially what I found, and this is just a story with these dentists we’re helping out recently, at a certain point, you want to make sure whoever’s sitting across from the table from you is an absolute expert, right? And what they do. And that’s absolutely what we provide. And the tax attorneys are those brain surgeons do that. I’m just the nurse, but you can absolutely figure this out and we’ll, we’ll help you and we’ll guide you along the way and that will empower you.
Brett Swarts (41:21):
And, and what we found is people have referrals and they send, because it really does change people’s lives. and the last one is, you know, just take your time, right? Don’t feel rushed and, but the pre proactive and connect your outer team, your outer team is your CPA, your tax person. It could be your business broker you’re working with. Connect them with us, you know, sooner start the conversation sooner, which will be I think very helpful. And ultimately our biggest value is being able to not only help you create and preserve more wealth, but actually free up capital that’s illiquid so that you can give more to charities that you, you believe in, right? Or just can be for your family. We really want to take a lot of this, literally the $17 trillion, half of that is, is in sta, high-end primary homes, commercial real estate and businesses like, like dental practices.
Brett Swarts (42:15):
And it’s illiquid, meaning it’s not really producing cashflow beyond just the immediate person. But if they can sell it and take all that equity, that additional cashflow could fun people who really need it around the world, in your own community. And it’s totally up to you. But we just have a big passion for giving back and, and taking the math and the finance with the heart of compassion and unleashing that compassion all together by saving that 30 to 50% in capital gains tax. So that’s a little bit about the heart of what we’re about. And, and I’d love to connect one-on-one with any of your listeners who are curious about learning more about what we do. Yeah. So where, where, what’s the best way to get in touch with you Brett? So got to capital gains tax solutions.com you can also just call us direct (916) 886-2986 that’s (916) 886-2986 and we can set up a time to chat on the website. You can just click on book a meeting and you get a free consultation to jump on a with me and kind of kind of walk through that. So those would be the two steps.
Mark Thackeray (43:20):
Awesome. So capital gains tax solutions.com where they can go and they can schedule a time to to, to talk with you face to face or talk with you over the phone obviously. And then also you can go there to download that copy of the feeling escaped or they escape feeling trapped. A downloadable guide. Right?
Brett Swarts (43:39):
Correct.
Mark Thackeray (43:42):
Well thanks again Brett. I really appreciate you taking the time to be on the show today. so many things on there. I’ve, I honestly have a page of notes. I’ve been scribbling the challenges is deciphering what those notes actually mean because I don’t have the best handwriting, but I so much value here today and I really appreciate you taking the time. And we’ll have to have you back sometime in the future
Brett Swarts (44:05):
My pleasure, Mark, and I’d love to be back and thank you so much for having me on the show.
Mark Thackeray (44:09):
All right. Have a good one.
