CFD 556 – The Power of the Deferred Sales Trust

September 27th, 2019

Brett Swarts is the Founder of Capital Gains Tax Solutions. 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. His experience includes numerous Deferred Sales Trusts, Delaware Statutory Trusts, 1031 exchanges and $85,000,000 in closed commercial real estate brokerage transactions.

He’s an active commercial real estate broker and investor with brokerage experience and ownership in multifamily, senior housing, retail, medical offices, and mixed-use properties. He is a licensed California Real Estate Broker who holds series 22 and 63 licenses.

Podcast Highlights

  • Who is Brett Swarts?

Brett is a Christian so he believes that each of us were given unique gifts to help others, and that shaped his world view when he was young. At the age of 12 he encountered several different mentors that helped him develop and realize that challenges are an opportunity to grow. In terms of superhero powers, Brett is a careful observer that can learn from the mistakes of others and see better ways to get things done.

In college, Brett was guided by one of his older cousins towards investing in commercial real estate which lead to him getting an interview with Marcus and Millichap. It was there that Brett learned that he loved the business and competition, and that the moment you learn more about someone’s business or piece of real estate than they know themselves is the moment you start adding value. Brett’s career started off rough but he kept persisting until he found the results he wanted.

We are forged in the fire, all the difficulties and challenges that Brett worked through are how he developed the tools and skills he needed to succeed.

  • The Power of Persistence

When Brett was working on his business he didn’t take the negative opinions he often heard seriously. He had his wife supporting his vision and felt like he was on the right path. Persistence has always been part of Brett’s personality so without a challenge to keep him engaged he tends to get bored.

The strategy of the deferred sales trust is something that caught Brett’s eye that he saw as something that could serve people’s needs, so he invested a lot of time into understanding it. This turned into Brett becoming a trustee and educator who teaches financial advisors, brokers, and high end realtors on the strategy.

  • Deferred Sales Trusts

You can defer your taxable gains on real estate by using the 1031 exchange as long as it’s done within a certain time period. The challenge is that if that’s the only tool in your toolbelt you may be put into a situation where you can’t make the best decision because of the 46 day window. It’s a seller’s market today, so if you sell today and buy 180 days later you are likely paying more with a higher interest rate for example.

Debt is not your friend in a highly appreciated, overpriced marketplace. The 1031 exchange requires you to buy something of equal or greater value, which means that you will have to take on that debt or more on the next deal. The intent is to take on smart debt when it makes sense, usually during a buyer’s market.

A deferred sales trust gives you multiple options for what you can do with your money. According to the American Banking Association about $17 trillion will pass from one generation to the next in the next 20 years, which is the largest wealth transfer in history. The older generation is struggling with how to sell their highly appreciated assets.

The deferred sales trust can also be used to fund your future business ventures, up to 80% of the money can be utilized without paying taxes as long as the use is for a business or real estate.

As entrepreneurs, the value of the deferred sales trust is that you still have functional control of your money as well as how much you want to pay in tax, if ever. As long as you don’t dip into the principle in the trust the money is in a tax deferred state which gives you more purchasing power without having to take the hair cut.

The deferred sales trust is freeing up entrepreneurs to continue creating economic value without the losses and drag that comes with paying taxes.

The government has talked about taking away the 1031 exchange already, so there is a chance that it won’t be an option sometime in the future as they try to figure their way out of $22 trillion of debt.

The fees are fairly simple, there is a one-time fee to set up the trust of 1.5% on the first million and 1.25% on everything above that. Brett, as the trustee charges 50 basis points once a year on the value of the assets within the trust. The last fee is for the financial advisor which is somewhere around 1%.

Brett’s educational platform trains business brokers, financial advisors, and other business professionals on the deferred sales trust which empowers them to earn more business. The deferred sales trust is a great way to separate yourself from the pack of other professionals by enabling you to save your clients the biggest expense they may ever have.

  • Brett’s Takeaway

Take massive amounts of action and focus on whatever it is that you are trying to achieve. If that means adding value with a deferred sales trust, connect with Brett. If you’re not getting the voices in your life that are speaking life into you find a mentor that will encourage you.

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