Combining Life Insurance with the Deferred Sales Trust
From pro-snowboarder to money mogul, Chris Naugle has dedicated his life to being America’s #1 Money Mentor. With a core belief that success is built not by the resources you have, but by how resourceful you can be. Chris is also a nationally recognized speaker, author, and podcast host. He has spoken to and taught over ten thousand Americans delivering the financial knowledge that fuels lasting freedom.
As a nationally recognized entrepreneur in his 16 years of high-level experience in the financial services and advisory industry, he managed over 30 million dollars in assets. Specializing in alternative investments, retirement strategies, and wealth accumulation both internationally and in his hometown of Buffalo, NY. Chris has built and owned 19 companies, with his businesses being featured in Forbes, ABC, House Hunters, and his very own HGTV pilot in 2018. He is currently the founder of The Money School and Money Mentor for The Money Multiplier.
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Brett:
Welcome to the Capital Gains Tax Solutions Podcast. I’m here with my good friend Chris Naugle with the Money Multiplier, we’re gonna kind of do a different show today, it’s a little bit like a presentation and a little bit like a podcast little bit like a discussion. But we’re gonna talk about Combining Life Insurance with the Deferred Sales Trust, in particular, Infinite Banking, as well as the concept. So I’m gonna let Chris kind of establish a little bit of the terms here, and then I’m gonna dive into a presentation. So hey, Chris, take it away.
Chris:
Thanks for having me on. I’m really excited about this topic. This is something that will help so many people that are exiting businesses that have large windfalls that are taxable. And also allow them to do it was something that a lot of people don’t realize, by using life insurance. But you know, when I say that word, it’s like a swear word to most people. So I gotta let me go one layer deeper. So what I’m saying life insurance, I’m talking about using a specially designed and engineered whole life policy, the same way that the banks use them commonly called bully in the same way, the wealthy use this for 200 years. And when I first heard about what you do, I was intrigued, because I’m like ashes, a lot of people, accepting businesses paying tons of money in taxes, there’s got to be a way to take the deferred sales, trust what you do, and with what we do the Infinite Banking Concept, and combine them to literally get it a really powerful strategy that will help people in a lot of different ways. And that’s what I’m most excited about. So thank you for having me on. And I think not just one, but lots of people are going to benefit from what we talked about today.
Brett:
Absolutely. And I’m Brett: if I didn’t mention that before, and I’m the Founder of Capital Gains Tax Solutions. Chris and I, by the way, I think we both hate each other on each other’s podcast, in the past 6, 12 or so. So you can also learn more about our stories there, although I will cover it some of the presentations here, it’s gonna be like a firehose today, but realize we’re recording this so you’re gonna be able to replay it and pause it and, and go back and take a peek at it. So I’m gonna share my screen. If you’re listening to the podcast, you’re gonna want to go to capitalgainstaxsolutions.com and search that on YouTube to be able to really understand and see this visually, but you’re going to be able to still catch a lot of this here. So just give me a second here as I pull up my presentation, and then we’ll fire away and of course, Chris along the way asks good questions.
The presentation is called to overcoming the biggest objection to a deferred sales trust. And then, of course, we’re gonna put the whole life life insurance infinite banking concept, as the underlayer throughout this entire presentation. This is actually my client, Steve. And it’s how I help see to finally achieve relief from retirement, when I sold his $1.7 million multifamily building happen to be here in Sacramento, California and helped him to for about $350,000 in capital gains tax by saving his 1031 exchange, of course, the magic will be where and how can the funds be invested. And that’s what’s gonna be really fun once we establish the foundation of what we’re doing here, and then what we can do with it. Okay, so like I said, I’m Brett. I’m the Founder of Capital Gains Tax Solutions up here in Northern California, but we serve nationally all 50 states. So as a legal disclaimer, Chris nor I am CPAs, nor tax professionals. And so this presentation is, we strongly advise you are just educational purposes, we strongly advise you to check out each of what we’re talking about with your independent legal counsel. Okay. So here are some of the facts right now. And I think part of what Chris and I are so intrigued by, and it’s such a big, big challenge for so many of our clients. And the facts are that 17 to $20 trillion, will pass from one generation to the next in the next 20 years. In fact, it’s about 18 years remaining of this, but it’s going to go on for a while. And it’s 17 to $20 trillion from the baby boomers, these are Christianized parents, and they’re looking at big amounts of tax if and when they sell these assets and pass them to their kids. In fact, there are about 77 million baby boomers, according to the American Bankers Association, that are starting to retire every single day and about 10,000 returning 60, 65 and they’re challenged with not only highly appreciated assets but also 1031 exchanges, where they don’t have diversification. They don’t have liquidity, and they don’t have some flexibility and freedom with their funds. And that’s a big challenge. You also couple that with a lot of business professionals and I’m glad Chris is diving into this, to provide the solution but a lot of business professionals and those who have been advising you, they don’t know about things like infinite banking, they don’t know things about like the deferred sales trust. And so every single day that they don’t know and every single day that perhaps you’re selling something, you’re paying hundreds of 1000s to millions of dollars in capital gains tax when you don’t have to. And what is that amount? Well, that amount is somewhere between 30 and 50% of your gain. In fact, most of our clients before they meet us, they’re very reluctant to sell. And this includes high-end primary homes, businesses. This includes commercial real estate includes cryptocurrency, it includes captive insurance includes anything that’s really subject to capital gains tax, we can use the deferred sales trust, so do you feel like this gentleman here, and if you’re seeing the screen, he has his arms crossed, and he’s feeling frustrated, because he’s not sure what he’s going to do if he sells because of, again, the capital gains tax depreciation recapture. So between 30 and 30%, of his gain, so a few things, Chris, I’m gonna let you know, it’s okay to dream. Although you may already be the number one in your profession or the top one, it’s okay to dream of helping your clients to for millions in tax and becoming the number one in your profession, because you’re adding so much value with a deferred sales trust. It’s also more important than ever to unlock new opportunities the challenges of the COVID-19 marketplace, these highly appreciated assets, and people looking for a new way to retire, and or invest is more important than ever to innovate and change. And so being the beat in the business of solving problems, I like to say, Chris, and let me know what you think. We’re not in the business of just providing tools or education, we’re in the business of solving problems.
Chris:
That’s our only business like first and foremost, every day, we both that is our number one mission to solve people’s money problem or their problem in general.
Brett:
And you got it. So who is this presentation for? Anybody who has highly appreciated again, business investment, real estate, primary home stock cryptocurrency, or if you’re in the profession of helping others do the same, this is for you. And now, here’s the key, the asset needs to be at least worth a million dollars, or at least have net proceeds of a million dollars, net of all debt and closing costs. And the asset has to have at least $1 million of gain if it’s too small, or fees, eat up the savings. So we want to make sure you establish those benchmarks right away. Okay. So first of all, what is a deferred sales trust? Well, the first sale is just an installment sale, it’s just a tool, it’s a strategy is kind of like a 401k. It’s kind of like an IRA. It’s kind of like a 1031 exchange. It’s kind of like a lot of things. But the main component is it allows you to defer capital gains tax when you sell a highly appreciated asset. Now it’s using what’s called IRC 453, which is an installment sale, the part known as an installment sale part of the IRS tax code goes back to the 1920s. You might know it as a seller carry-back where you become the lender on the sale. And when you do that you don’t pay tax until you receive payments, and what’s called constructive receipt cut like a 401k. Chris, if I park my funds in an IRA or 401k, guess what? When do I pay tax?
Chris:
When you take the money out.
Brett:
When you take the money out? Exactly. So when you take the money out is when you start paying tax, and in the meantime, it can be in a deferral state, and why would you need one right? Well, we think you need one more now than ever then with the diversification, liquidity, and options for what you really want. And that’s really the focus here we want to say hey, what kind of outcome you’re looking for, and what tool what strategy is going to help you get there and I want you to think about the old way versus the new way there’s the old way of doing things for a lot of people and that’s like a blockbuster. I’m gonna propose to you Chris, remember going to blockbuster back in the day.
Chris:
Sure do man and I loved every moment of it.
Brett:
Do you remember your favorite video but the worst part was if you loved it when you’re in there, it’s exciting. It’s like being at Toys R Us as a kid, your blockbuster has seen your favorite video. But on the wall is your video that you want to get, right before you get there, someone steps in front of you and grabs that video that you want, right?
Chris:
That happened that was a real thing.
Brett:
Frustrating. So what happens then? Well, even if you got that video, you might have to return it within three days. If you’re living in the Midwest, like a lot of our clients, you’re fighting snow and traffic and who knows to get that video, right? You may be lost an hour you had fun in the adventure. But sometimes you know this a new thing called Netflix and Netflix comes out. It’s never sold out yet to pay some ongoing fees. But it’s seamless. It’s flexible. And you get movies on demand instantly. And that’s sort of like the deferred sales trust versus the old way, old transactional way of doing things like the 1031 exchange, very restrictive, not necessarily any diversification. Typically taking on a greater amount of debt. And you’re doing this all in a very, very short time period. We call it the shotgun wedding. 45 days to identify, 180 days to close versus Netflix versus the deferred sales trust. There are no timing restrictions. You can put it into insurance policies. You can put it into real estate, your own passively or actively, you can put it into stocks, bonds, mutual funds, you can diversify. And it’s a new way, it’s the better way we think it’s I think it’s the best way right now. So my goal for this presentation is to show you why the different shell stress is the number one growth strategy, that if you’re a professional need to be focusing on 2021. Or if you’re an actual client listening to this, why it’s the number one way to create and preserve your wealth. In fact, I’m taking more of a preservation play, Chris, I don’t know where you’re at with the marketplace. But I feel like now more than ever, it’s a great time to preserve, and be cautious on the creation because the values are so high, quickly, touch on what you think the marketplace is right now, why it’s such a good time to preserve your wealth.
Chris:
I am really scared. And we are 100% in the preservation mode waiting for the next opportunity. And that Wait, sometimes people don’t want to do but I think coming up in the next few years 2022, 2023 the markets are going to fall apart. It’s just patterns. And I think that’s exactly what’s gonna happen. So yes, I’m 100% preservation, but in the preservation and moving my money and allowing my money to work and make additional revenue or additional income without having to take on the risks that I used to wealth going long on stocks, bonds, ETFs, and all those things.
Brett:
Excellent. Love it. Yep. And all of those things can be structured inside the deferred sales trust and that way, which is great. So two things, we’re going to cover how to grow your business or create and preserve more of your wealth with a DST even if you don’t have any capital gains tax knowledge or a ton of time, and then how to use the deferred sales trust to drastically increase your sales and conversions if you’re a business professional. So let’s dive right in. By the way, this is a little bit about my background. When I first started out it was in 2006, I worked for a company called Marcus and Millichap. And it was one of the largest most prestigious kinds of firms and still is one of the best in the world and especially in the US specializing in real estate investment sales. I’m currently a multifamily broker, EXP commercial and I help clients still sell multifamily properties and do deals across the US. But my main focus is capital gains tax solutions. I’ve closed about $200 million in deferred sales trust and multifamily retail office land and investing in commercial real estate syndications valued at over $200 million. I love senior housing, mixed-use, retail, mobile home parks have also closed countless 1031 exchanges, Delaware Statutory Trust, and deferred sales trust. And I have held my series 22 and secondary licenses. I’ve been featured on a bunch of cool media like Christian shows and a few others like Shark Printer Podcast. That was really fun one, but it wasn’t always easy. You know, I started out at Marcus and Millichap not knowing much. I wasn’t the person who was closing the deals. In fact, I was just trying to figure it out. In my first year in the business, I was not the successful guy celebrating these big, big, big deals. I was one of the guys in the back trying to figure it out scratching my head saying how are these guys doing this thing. And I had a really successful mentor cousin who was teaching and coaching me at the time. And that was great because I started to grow. And I started to learn something new. But just when I started to get some success a big thing happened. It was the 2008 crash. So I went from making just a little bit of money and getting my business off the ground and brokerage By the way, it’s 100% commission sink or swims. I went from making just a little bit of money to like zero overnight. And I don’t know Chris, have you ever been so scared and frustrated and pouring something your heart and soul into something just to see it not really succeed, and not knowing how you’re going to support your family. You see growing up, my parents were divorced, I saw wealth on one side. And I saw, let’s say scarcity or just a very low income on my mom’s side, I was moving on 90% of the time 10% of the time with my dad. And so I’d go to the Bay Area, build these houses with him in the summer times and understand the real estate and entrepreneur world. But then I would go live with my mom. And then mom didn’t get along. And let’s just say my dad didn’t share much with my mom and so so I knew growing up that I want it to be able to provide for my family have a lot of margins. And so during this time, I loved real estate. I loved helping clients, but I wasn’t really succeeding financially speaking, okay. So I did what every good entrepreneur does, and I wouldn’t get a side hustle. I took some steps to really change the way I approached the business as well. And so by day, I’d be working at Marcus and Millichap making cold calls. And by night I’d be working in a place called Cheesecake Factory. It was our favorite restaurant, my wife and I, and you know and I and we moved in with my brother, it was so tough. And I said you know, I’m gonna do whatever it takes. If you’re willing to support me I want to continue in this business, but I want to I we have to keep food on the table. So she was staying home full time with our daughter. And I was hustling and I was pushing, it was a struggle. It was a challenge. And just at that time I had my manager at the time brought in a gentleman who spoke on the deferred sales trust. And see I was going through my challenge but so were a lot of my clients you see they were fighting with the banks. They were losing half their wealth and lost all of their wealth. And they were climbing out of a crash because they weren’t diversified. They took on too much debt and back to that old 1031 blockbuster, they were stuck trying to rent those videos and having to return them in three days. And this scenario they’re having to renegotiate with banks. And we kept identifying that the 1031 exchange was one of the biggest challenges. But beyond that what they really needed was diversification. They needed predictable income streams, they need it to be out of debt, they needed to be able to take more control of their wealth, and not be holed into just the real estate marketplace. And as I taught them how to do this, my business grew, why, because I was solving problems for them. And it was speaking to their main focus, which was creating and preserving more wealth. So that’s what I did. And fast forward, it’s been over 10 years and 10,000 hours, blood, sweat, and tears. Fortunately, the Lord has blessed the business and I’ve been able to succeed. And my wife and I have five kids here in Northern California. And she’s been able to stay home full time, which has been our number one goal for us with our children and our family. And enough about that, though, I want to teach you the after 10 years, I discovered the hard way, but I want to teach you the easy way as much as I can in the next 30 minutes or so.
By the way, if you’ve been struggling, this is probably why the perfect storm, if you’re a baby boomer, listen to this you may perhaps create a lot of wealth, and you don’t see a clear exit plan without having to stay in real estate or stay in the business or not sell your cryptocurrency or not sell your stock, because of the capital gains tax is the perfect storm that’s happening right now. By the way, it’s not your fault. Your CPA probably doesn’t know what I’m telling you about, although we do have lots of CPAs that have joined us. And we certainly want their blessing. But also the 1031 exchange companies, they don’t want you to know about this, they want to keep you in the shotgun wedding, right? Where you’re getting engaged in 45 days, and you’re getting married in 180. Those are the 1031 rules. And really, we want our clients to be able to establish having freedom from the capital gains tax, the toilets, the trash, the employees, the tenants, the liability, and not just kick it down the road, you want to be able to diversify and surely be able to retire or buy or invest on your terms. So here we are, what are the hard way is 1031 exchanging, okay. By the way, the 1031 exchange only works for an investment property, doesn’t work for a primary home doesn’t work for stock doesn’t work for a business sale. In fact, the gentleman that emailed Chris and I have talked to us, he will remain nameless, but he’s actually selling a business. Chris, do you want to touch on his big challenges as well, while I continue on this conversation here?
Chris:
Well, his big challenge is the big challenge of many people, he doesn’t want to give up 40 to 50% of his heart, he’s put blood sweat, and tears into this business, he’s exiting the business for a very large profit, a hell of a large gain. And when he looks at the gain, although it looks big on paper, when he factors out all the taxes, it’s not so big anymore. And he just does not feel comfortable giving up all of that money to the government in taxes. And he’s coming to us saying there has to be another way. I know my CPA doesn’t have the answer. I know my advisors don’t have the answer. But there has to be something. And he stumbled upon a podcast that you and I did a while ago. And he says this could be it. But, can this work using the privatized banking policy, the infinite banking concept, can I own that inside of this deferred sales trust, which is where he was struggling because he’s very risk-averse. He doesn’t want to take your hard-earned dollars from selling his business and put them into something that potentially could go down stocks, bonds, mutual funds, ETFs, he wants to diversify, and have this money in his safe place, which is privatized banking, commonly, the concept that we talked about is the infinite banking concept. And it’s funny, Brett, as you mentioned, your CPA may not know about this. Well, that makes two things now because your CPA probably doesn’t understand the infinite banking concept and how we use whole life insurance not just any whole life specially designed and engineered whole lives with this client is very passionate about, very much in love with the wants to use that strategy for this. So that’s our story. That’s who we’re trying to help solve the money problem for.
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