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- [00:00]
John Hope Bryant
You're listening to an iHeart podcast.
- [00:06]
Bom Han
The best moments happen when you're with your people, laughing, vibing, just enjoying life. Coke is making those moments even sweeter.
- [00:16]
John Hope Bryant
Share a Coke is back and it's.
- [00:18]
Bom Han
All about sharing with the whole crew. Doesn't matter if it's your bestie or bro, there's a can with their name on it. So grab one for the squad and make some memories. But hurry because these Coca Cola limited edition bottles and cans won't won't be here forever. Don't miss your chance to share a Coke with your favorite people. Run a business and not thinking about podcasting? Think again. More Americans listen to podcasts than ad supported streaming music from Spotify and Pandora. And as the number one podcaster, iHeart's twice as large as the next two combined. Learn how podcasting can help your business. Call 844-844-IHeart.
- [00:52]
John Hope Bryant
In a world of economic uncertainty and.
- [00:54]
Bom Han
Workplace transformation, learn to lead by example from visionary C Suite executives like Shannon Schuyler of PwC and Will Pearson of iHeartMedia.
- [01:04]
John Hope Bryant
The good teacher explains the great teacher inspires.
- [01:08]
Dan Flores
Don't always leave your team to do the work. That's been the most important part of.
- [01:13]
Clayton English
How to lead by example.
- [01:16]
Bom Han
Listen to leading by Example executives making an impact on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.
- [01:26]
Clayton English
Why is a soap opera Western like Yellowstone so wildly successful? The American west with Dan Flores is the latest show from the Meat Eater Podcast Network. So join me starting Tuesday, May 6, where we'll delve into stories of the west and come to understand how it helps inform the ways in which we experience the region today.
- [01:48]
John Hope Bryant
Listen to the American west with Dan Flores on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. Welcome to Money and Wealth with John Hope Bryant, a production of the Black Effect podcast network and iHeartRadio. Yo, yo. This is John Hope Bryant and this is another exciting episode, at least I think it's exciting. Of Money and Wealth. Money and wealth is the one of the top 100 business podcasts in the country. Top 40 on entrepreneurship. Tell all your friends about it. This is John o' Brien and I'm about to break some eggs. I'm going to tell you how the wealthy do it. And I'm not some guy selling books and tapes. Whatever. I don't mind people doing that. There are a lot of great teachers doing that. This is this. I'm a practitioner. I'm somebody who've done who's Done it, I'm doing it. I have 400 employees right now. My payroll is a million and a half dollars every couple weeks. You know, we have $100 million of annual activity in our various enterprises. Invested $4.5 billion, $4.8 billion through the various enterprises in the communities and individuals and homes and small businesses, et cetera. About 300 million in private enterprises. So I'm talking from experience, right? Had some successes, had some failures. I was homeless. My credit score was at one time three to 400. When in Compton. Grew up in Compton in South Central la. From the bottom quartile. The bottom. The worst zip code. Not worst, the one of the poorest zip codes in America, certainly in the West Coast. Confident, South Central to, you know, the 0.01% or above the 1% group on income and wealth in one generation did it legally, right? So the first thing is you hear people saying, I hate rich people. No, you don't. You hate rich people until you become rich. What you hate is a gamed system. You hate a system that no matter how hard you work, that you feel you just can't get ahead. You feel like you just can't succeed, like you've got too much month at the end of your money and you feel the system is rigged against you. And in many ways it might be, and in some ways it is. And then there's bad capitalism, right? There's bad capitalism is where I benefit and you pay a price for it. And good capitalism is where I benefit and you benefit more. I try to practice good capitalism and capitalism and democracy are horrible systems, except for every other system. I've been to 100 countries around the world, so about little under half of all countries in the world. And I've seen a lot. And I can't think of a better system with regard to being able to go from the bottom to the top than ours. It can be better, it can be improved. There's a reason why everybody in the dang on world wants to get to the United States of America. Even with our current challenges and problems, even with the politics of division, even. Well, by the way, it's been worse. You had slavery in this country, you had Jim Crow in this country, you had black like legal racism in this country, you had assassinations in this country, like, be hopeful, the sun will come up tomorrow. Everything's going to be okay. Now let's get into this episode. By the way, thanks to everybody who participated in green socks day, April 30, the last day of financial literacy month. Walmart, thank you very much for making the socks at no cost to Operation Hope and Financial Literacy for All Initiative. It was co sponsored by Financial Literacy for All Initiative, which I co chair with the CEO of Walmart, Doug McMillan and Operation Hope. I'm the founder of Operation Hope and it involved all the sports franchises. So thank you. Roger Goodell, NFL. Thank you. Adam Silver of the NBA. Thank you for the commissioners of the Major League Baseball, Major League Soccer, nascar, Hockey. Miss anybody out going from memory. So all the sports franchises did it. Organizations, thank you so much. You didn't have to do it. First time, I think they've ever collaborated on something like this in a public effort. It was the first time we ever had they were on one stage together in a public way when they came to our forum, December 2024. If you've never seen that, go back and watch it. It's online. You see it on YouTube. Pretty amazing. And then we had a bunch of corporations and companies and housewives and folks from the streets to the suites from urban America. Rural America is really quite beautiful. The color for a moment, black or white as in race, arguing over that. Or red or blue as in, as in politics, but green, the color green, which is at the root of everything. I keep saying, your day is not about God or love. Your day is about money. So let's learn about money. And this segment is about teaching you how the wealthy use their money, right? And I don't just want you to get rich, I want you to build wealth. And how did I build wealth? How do I continue to build wealth, by the way? Because this is an ongoing process. I'm in the arena of capitalism every day, right. And I think the best is yet to come. My biggest endeavors, I think in the offing you'll hear a few of them that gets announced here soon. I mean, I've done some big stuff, but I think the biggest is coming. So I'm still learning. But I'm, to quote my friend Quincy Jones, I'm just nosy as hell. I've got two ears and one mouth, so I listen twice as much as I talk, right? I'm just nosy as hell. I want to know everything about everything and I want you nosy. And I don't want you resentful of people who are successful. I want you to learn how to go get some yourself. This is the James Brown version of affirmative action. Open the door. I get it my dang self. So let's get into this. So this episode is learn from the wealthy how they Spend how they borrow, how they, how they pay, and don't pay taxes. And no, this is not some tax avoidance scheme. I'm going to break it all down for you. As I keep saying, I like math because it doesn't have an opinion. That is a quote from my friend Melody Hobson that I try to give her credit for all the time, even though I've taken ownership of this dangle thing because it's so much of what I believe. Okay, get your pen and pencil out, or your iPad or your iPhone or your notes app or whatever. If you're running, you may need to stop and take some notes or you may want to come back with your girlfriends or your guy friends and get in the huddle. And really, this is an episode you may want to replay back and have a conversation about because I'm going to really unpack a number of topics I'm trying to top. I'm going to try to tackle three big areas at the same time in one episode that I think are major areas of major and misunderstanding about the wealthy, not just the rich. The wealthy you make rich as a contract. So you make so rich you can make money on a contract, as I keep saying, $30,300, $3,000, 30,000, $3 million. You can still lose it, okay, because it's a contract, it's income, right? And if your outflow exceeds your inflow, then your overhead will be your downfall. If a contract stops, then your expenses continue and you've not built wealth that will allow the income to sustain your way of life. You can still go broke, which is why you hear about, you know, professional, professional sports players with a hundred million dollar contract, you know, into working at Starbucks or something in eight years because they thought it was going to last forever and just spent, spent, spend, spent, spent. Okay? So you make money during the day, you build wealth in your sleep. And my brother, Tony Ressler told me this one day and it just really blew my mind. This was, I don't know, six years ago. I really thought I knew something until I didn't realize I didn't. And Tony's one of the most successful business owners in the business leaders in the country and a good friend of mine and has been a partner in a couple of my initiatives and ventures. I also want to give some credit to Michael Araghetti, who is also an early partner in my promise Homes company. Okay, let's start this. We're going to pull back the curtains on how the wealthy really live, talk about how they finance their lifestyles. How we finance our lifestyles. I guess I'm now part of this group. Then I'm going to talk about how they can lose it all. Okay, the wealthy. I'm also talking about how to navigate taxes and I'm also going to talk about unique financing tools that the wealthy use. Okay, concept number one, wealthy people borrow against assets. They don't just spend cash. This is, I mean this is so important. The power of margin accounts and security based lines of credit is something I'm going to break down for you. So I'm going to come back to that. If I give you sort of this framework. Borrowing at low interest rates against stock portfolios or real estate, using leverage to keep assets growing while still accessing cash. All this is part of the same conversation. Rich people don't sell stock, they borrow against it. This is really important. While this delays or avoids capital gains is a mystery to most people. Or how this avoids capital gains and just taxation is a mystery to most people. I'm going to unpack that for you. I'm going to relate this to Elon Musk. I'm not picking on Elon Musk. I think he's a genius, actually. I use a Starlink technology. But I'm going to explain why and how he did some of the stuff he did. Not just him, but I think he's the most notable example because he doesn't earn an income. Best based, I can, best I can tell, okay, wealthy homeowners take out HELOCs instead of refinancing or selling home equity lines of credit. Philosophical point that's important to note here. The poor sell time, the middle class sell labor. The wealthy sell or borrow against assets. And by the way, just going back to the Elon Musk thing for a minute, this is a trait that I want you to pick up in your life, which is I want you to not be emotional about decision making. Emotions have incredible value. In fact, I think that if you're, if you don't have EQ emotional intelligence and you just have IQ intellectual intelligence, then you're at a loss. I mean, you're a human doing. You're not a human being. We're not human beings having spiritual experience. We're spiritual beings having a human experience. So energy matters. And so you can have a lot of brilliant people who have a blind spot called people. Some finance brilliant people have this issue and some tech brilliant people have this issue where they just have a blind spot called people and they're just not complete leaders even though they think they're Smart in one area, it can make them smart in others. A great leader who's well rounded. Okay? And that's what I want you to be. You have a multipl, multiplicity of skills. You have IQ and EQ intellectual intelligence and you have emotional intelligence, right? Which includes empathy and caring for people, in my opinion. Treat others as you want to be treated when something happens. Capitalism is a gladiator sport, right? I don't want you getting locked up and all getting your emotions all wrapped up because somebody in business took a jab at you or somebody in business took an advantage over you. That's in the broader context, it's just business. And when you. I've explained that often capitalism is a negotiating table, right? On one side of the table is the seller and the other side of the table is the buyer of a product. And the seller's job is to to extract as much from you in price and deliver, I guess as little as you in resources in that product so they can make the maximum profit. Your job on the excited act table is to give the least in price and to extract as much in value. And every negotiating table is a good negotiation. Everybody leaves slightly annoyed. I said that in a previous podcast. You can't say that enough. So you're going to have disagreements in business. You're going to have people who are gladiators at the highest level who are going to take swipes each other from time to time. I try not to make that my business. My business is business. I try to stay focused and you know, I'm just not one ounce of my self esteem depends on somebody else's acceptance of me or not or not. So I but I do recognize that other people see a win lose situation, not a win win situation. I want you to be win win oriented and you treat people lovingly and with respect because that's how you're built, not because how anybody else rolls, right? So don't be emotional in business. So the wealthy again, think differently. This is a very powerful point. The poor sell time, the middle class sell labor, the wealthy sell or borrow against assets. Okay, so let's dig into this a little bit. This is so powerful. Okay, let's talk about. In order to understand what I'm talking about, we got to unpack a couple of the vehicles. The biggest one I want to talk about are margin accounts and securities based lines of credit. So these are major vehicles for the wealthy. They use them smartly to build wealth, to reduce taxation taxes and maintain liquidity, availability or access to cash without selling Their investments. Right. I use these vehicles, by the way. So the definition, let's start there. Because people throw these terms around and nobody actually ever tells you what this stuff means. A margin account lets you borrow money from your brokerage firm using your existing investment, investment or investments as collateral. Okay, I want you to think about a stock account, etf' bonds, et cetera. It's often used by more securities, publicly traded investment grade products, and is used primarily to leverage your portfolio to grow it. And that's different from a securities based line of credit? Slightly. I'll explain that. So how does this work? So let's say you deposit, I'm going to say a million dollars. But you can, by the way, you can put $100,000 in it, you can do $50,000 in it. I guess there may be some minimums, but theoretically you could have a $25,000 margin account. But let me make this easy. It's a million dollar in stock that you have in this hypothetical example. Because in this example you're wealthy, your brokerage firm might let you borrow, let's say 50% of that. Okay. It depends on the kinds of stock. If these are perceived to be riskier stocks, maybe they're technology stocks, then the brokerage might say, we only want to give you 50% on the value. If these are stocks that are considered blue chip, as they say, you know, the best of the best, what they call the flight to quality. And I'll start naming names, but like, you know, the companies that you, it would be obvious to you then they might let you borrow beyond 50%, sometimes as much as 70%. Okay, I don't think you should be borrowing 70% of the value of the stocks. I'll explain in a minute. I'll explain why in a minute. That borrowed money now can be used to buy more stock or for other purposes. This is America you can use. No one can tell you what. Well, if there are restrictions, they can tell you what to use it for. But in this example, the margin accounts that I'm aware of, they would not attempt to restrict your movements as long as it's legal. So now you have a million dollars worth of stock you now borrow. You have a margin account of $500,000 in this example. Do not use all $500,000, please. But you could theoretically borrow up to $500,000 in this example to buy more stock. Now you're going to pay interest on the money you borrowed. Now let's say your name is Joanne here. You've become the bank of Joanne. John, the bank of John. So you're not borrowing from a bank or financial institution or whatever. You're borrowing from yourself. These are your assets, right? But you must pay for the person, the institution, extending the credit to you against your assets. You must pay an interest rate and margin. Interest rates Vary, you know, 7 to 12% on average. I pay a little less than that. The more of a preferred customer you are, the less you pay. But 7 to 12%, and it might actually be lower for this next product. I'm going to tell you. But just one step at a time.
- [19:45]
Bom Han
Run a business and not thinking about podcasting, Think again. More Americans listen to podcasts than ad supported streaming music from Spotify and Pandora. And as the number one podcaster, iHeart's twice as large as the next two combined. So whatever your customers listen to, they'll hear your message. Plus, only Iheart can extend your message to audiences across broadcast radio. Think podcasting can help your business? Think iHeart streaming radio and podcasting. Call 844-844 iHeart to get started. That's 844-844, iHeart.
- [20:16]
Dan Flores
Yo, Kpop fans. It's your boy Bomhan. And I'm bringing you something epic. Epic. Introducing the K Factor, the podcast that takes you straight into the heart of K Pop. We're talking music reviews, exclusive interviews and deep dives into the industry like never before. From producers and choreographers to idols and trainees, we're bringing you the real stories behind the music that you love. And yeah, we're keeping it 100, discussing everything from comebacks and concepts to the mental health side of the business. Because K Pop isn't just a genre, it's a whole world. And we're exploring every corner of it. And here's the best part. Fans get to call in, drop opinions, and even join us live at events. You never know where we might pop up next. So listen to the K factor on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. This isn't just a podcast. It's a movement. Are you ready? Let's go. Let's go.
- [21:16]
Clayton English
The American west with Dan Flores is the latest show from the Meat Eater Podcast Network. Hosted by me, writer and historian Dan Flores and brought to you by Velvet Buck, this podcast looks at a West available nowhere else. Each episode I'll be diving into some of the lesser known histories of the West. I'll then be joined in conversation by guests such as Western historian, Dr. Randall Williams and best selling author and meat eater founder Stephen Rinella I'll correct my.
- [21:47]
Greg Lodd
Kids now and then where they'll say when cave people were here and I'll.
- [21:51]
John Hope Bryant
Say it seems like the Ice Age people that were here didn't have a.
- [21:54]
Greg Lodd
Real affinity for caves.
- [21:56]
Clayton English
So join me starting Tuesday, May 6, where we'll delve into stories of the west and come to understand how it helps inform the ways in which we experience the region today.
- [22:08]
John Hope Bryant
Listen to the American west with Dan Flores on the iHeartRadio app Apple podcasts or where, wherever you get your podcasts.
- [22:16]
Greg Lodd
I'm Clayton English. I'm Greg Lod and this is season two of the War on Drugs podcast. Sir, we are back in a big way, in a very big way. Real people, real perspectives. This is kind of star studded a little bit, man. We got Ricky Williams, NFL player, Heisman Trophy winner.
- [22:31]
John Hope Bryant
It's just the compassionate choice to allow players all reasonable means to care for themselves.
- [22:37]
Greg Lodd
Music stars Marcus King, John Osborne from Brothers Os Osborne.
- [22:41]
Dan Flores
We have this misunderstanding of what this.
- [22:44]
John Hope Bryant
Quote unquote drug thing is.
- [22:46]
Greg Lodd
Benny the Butcher, Brent Smith from Shinedown got be real from Cypress Hill, NHL enforcer Riley Cote, Marine Corps vet, MMA fighter Liz Caramouche.
- [22:56]
John Hope Bryant
What we're doing now isn't working and we need to change things.
- [22:59]
Greg Lodd
Stories matter and it brings a face to them. It makes it real. It really does. It makes it real. Listen to new episodes of the War on Drugs Podcast Season 2 on the iHeartRadio app Apple Podcasts or wherever you you get your podcast and to hear episodes one week early and ad free with exclusive content. Subscribe to Lava for Good plus on Apple Podcast.
- [23:31]
John Hope Bryant
Okay, why is this a smart use? The wealthy use this to leverage for growth. It's used to increase returns the profit when you're confident about a stock's performance. So this is where it gets a little complicated. Good debt juices profits. So I have friends of mine who are in the hip hop industry who have bought properties for all cash real estate properties. I've encouraged them that that is very admirable and I just know they want to be free. Okay. But I've explained to them that there is no billionaire or cent a millionaire that got there without good debt. There's no city or county in America or the world actually it's a leading gdp, gross domestic product, leading economy that didn't do it with good without good debt. So bonds that are issued and things but I mean these are prime products not the homeboy shopping network financing. So I want you to use good debt for conservative leverage. You shouldn't be leveraged up to your eyeballs, you shouldn't be 90% loan to value. But I've encouraged my friends who own these properties free and clear that they should put a modest mortgage on it because that juices your returns. The less money you have in it and the higher the guarantee. The return. Not guaranteed, but if you are highly confident that this asset is going to yield you a return, the less of your money's in it and the more of OPM other people's money that's in it, opm, the higher your return on your investment, if that made any sense. If not, you can play this back, but I need, I have a lot of ground to cover in a short period of time and I'm already 20 minutes in as I need to go a little faster. And by the way, in the comments, when you see out clips of this in social media, you can ask me my, my opinion on, go deeper on something and I will try my best to respond between meetings and all that kind of stuff. Okay? So with regard to stock, so if you think that the stock you're invested in or these things you're investing in are really, really, really special and you just want to invest more in it, you and you're confident, which is hard to be, by the way, but if you're highly confident of a performance, then, then, then leverage is a good thing. Okay? Reasonable leverage. There's another benefit that's much more palatable to, to me than talking about leverage because I think you'd be very careful about leverage. Liquidity without selling. You can access your cash without triggering capital gains taxes from selling stock. Yes, that's what I said. And I want you to play that back slowly in your head. This is gonna repeat it for those in the back of the room. You can access your cash without triggering a tax bill because you haven't sold anything. Yes, that's what I said that you do not pay taxes on debt. Okay? Even if it's your debt, even if it's debt that you've incurred to get access to your own money. This is very important. You do not pay a tax on debt. Proceeds, loan proceeds. Now don't go crazy going to get loans. I'm just telling you this is what the wealthy do and you get all this stuff. Is anything that's done moderately like anything in moderation. Most things in moderation are healthy for you. Good for you. Drugs in moderation are prescribed. Alcohol in moderation will lower your blood pressure. Most things in moderation, Sleep in moderation is wonderful too Much sleep puts you to sleep, right? So debt in moderation, strategic timing. Borrow during downturns to buy the dip or hold onto appreciating assets. This is a more sophisticated thing. I don't want you, I've wanted to cover that, but I don't want you really holding onto that buying in the dip. That requires a lot of confidence and sophistication. And I don't want you calling me, blaming me, because you thought as soon as it was a dip and it was really a, a cavernous valley that opened up because of an economic earthquake, never to recover again. So you don't do that unless you're a sophisticated investor. Now let's talk about risk. If the value of your securities fall, the brokerage may issue what's called a margin call. And a margin call requires you to deposit more money or sell assets quickly. Okay, Put simply, you have $100,000 account. You had a margin, margin account for $50,000. You use all $50,000. Let's be aggressive. You had a margin account for you, a margin account for 70% loan in value. You borrowed $70,000. The top end value of the stock was $100,000. There was a shaking of the mark, the market, which just happened, by the way, and the value of that account went down to theoretically down to $80,000 from 100,000. Okay? And you were able to borrow 70% of that stock value. Now you can only borrow, let's just say $60,000 or $55,000. And you've now leveraged yourself to $70,000. There's a margin call that calls you up to say you either pay that down to the maximum or lower of your available limit, or we must sell, they must sell some stocks. Okay? So this can amplify losses or it can amplify gains. Okay, now let's get, because I want to get into the lesson here, let's get to securities based lines of credit. Securities based line of credit is a line of credit secured by your investment portfolio. Right? It's similar to a home equity line of credit, but backed by stocks instead of real estate. And the easy example between this and just a margin account is just, it's more sophisticated. It, it's issued typically by a bank, not by your brokerage company. And they just give you a loan securitized by your, your, not by your house, but by your securities portfolio. The interest rate is typically much less, sometimes as low as 3 to 5%. Better terms, better conditions, generally speaking, same tax treatment. You're not basically taxed on It. Because it's debt. Yeah. And there are other parts of this. You know, you can get slightly higher leverage with this vehicle, but they're basically the same, just the ones more sophisticated. So what's my. Drop the mic on this before I get to sort of the risk. The rich don't sell, they borrow. They let their money keep working and growing while they access credit like it's cash. Poor folks sell too soon. Rich folks borrow smart and build empires. Can I get an amen? Okay, so now let's go back to the lessons because now I want to get to how folks can lose their money. So let's take. And again, I'm not picking on this guy. I'm just saying that this is just a wonderful example because his stuff is so public. And again, not saying this better or worse. I'm just saying. Here it is. So Elon Musk, theoretically the richest man in the world today, does not earn, best I can tell, an income. He tried to get an income from his company and the courts blocked it. So his pay package was blocked. He does not get an income. There are other people who don't want an income. I'll get to that in a minute. Most wealthy people don't want an income. So how did he buy what was called Twitter, which we now call X? What he calls X, he used, I believe, stock from a company he owns called Tesla, which is a publicly traded company, his rocket company. Other companies he owns, other assets he owns, are not publicly traded, they're privately financed and all that kind of stuff. The publicly traded entity, the biggest one he has, is Tesla, which trades at a higher price to earnings ratio price of the stock than any other car company. So kudos to him. He uses the stock from the car company. His stock takes a loan against it, I'm calling it a margin account. His might be more sophisticated. He might have it in a trust or whatever, and hopefully I'll get to that before this podcast is over. And he used that to borrow money along with bank money and other investors to buy assets. In this particular example, he bought. He used to buy X, what we call Twitter, what I used to call, what I call Twitter. And that works as long as the asset goes up or his stock value doesn't go down. And then he used some money to go pay for this and to pay for that. And lifestyle, all that works unless you drop below the ratio of value of your stock to your debt that you've floated. Now, I don't know his business model, and that's a lot of Money. It's really, really, really, really hard to go broke when you, when you, even if you're losing 100 billion or 150 billion on a basis of, I mean, a billion dollars would by itself would be hard to go broke on in one lifetime. So let's leave that aside for a moment. Let me give you a practical example. You're a tech entrepreneur, and you have taken a company public in Silicon Valley, and everybody told you this company was not everybody. Wall street told you the valuation of this company was a billion dollars. In this example, you own 70% of the stock, $100,000 worth of stock. You then went and got a. You're not earning any income because the company's not earning any income. It's a startup and it has not made a profit yet. It may not make a profit for a while, but Wall street believes in it. The stock has gone public. The stock is worth a billion dollars. Investors have bought the stock. You own 70% of the stock in this example. I'm just making this easy. And your stock is worth, hello, $700 million. Now, you wouldn't get a margin loan or securities loan against that. You now want to go buy a yacht and houses and planes and whatever it is you bought, right? And you got your lifestyle expenses every year. And you ran up a tab in this example of $500 million. And you think, well, this is easy. The probably is worth a billion. I owe 500 million. But, but my valuation is 700 million. I still have $200 million. Then there's something that rocks the stock market, that rocks the economy. And tech stocks are more volatile than normal stocks, by the way. Traditional stocks in this ex. The value that you wake up one day. And the value of this company now, not a billion, is 600 million, okay? You had a line of credit for 700 million. You've used 500 million. You have a 70% loan to value ratio, okay? And maximum, the bank calls you very nicely in this example because you're worth so much and you owe so much. If you owe the bank 4 million, the bank owns you. If you owe the bank 400 million, you own the bank or at least you have leverage to negotiate, right? So the bank calls you and said, hello, you need to. No big deal for you, right? You just need to pay this down. Because now your line of credit is not 700 million. Your line of credit is actually. So the whole thing's worth 600 million. Your line of credit is more like 350, 375, something like that. You owe 500 million in this example. No. Yeah, you owe 500 million in this example. So you got to come up with 100 million plus in cash. I'm doing this off the top of my head. It's a bad day, right? You don't have that money. You have to go sell assets. That's called a fire sale. So you've got to start selling assets quickly or the bank can, the bank or security firm can seize, take your ownership. You just go broke. There's many people who've gone broke, just like I just told you. So here's an other example of what really happened in most recently 2021, 2022, you had this meme stock fiasco where people thought a company was worth X and for no good reason, they drove the price up. And then people who are wealthy, people who are mischievous, they sold at the height while all poor people got stuck in the middle and couldn't. And then the price was dropping. And it's like a falling knife, right? And they're stuck at $400 a stock and the stock is really was worth 100 bucks and you can figure out the rest. And hopefully you didn't take out a loan in the midst of all that stuff. There's a company called Archicos, I'm sure I'm saying this improperly. Capital management that collapsed, losing $20 billion because they were over leveraged. In this particular crisis, you have new wealth like cryptocurrency in tech exits and IPOs and these things. If you're overconfident, if you're over leveraged, if you're ignoring taxes and liquidity needs, well, you can. It can be a very, very bad day. So you gotta remember the wealth is not what you earn, it's what you keep. Leverage without discipline is a shortcut to poverty.
- [37:09]
Bom Han
Run a business and not thinking about podcasting, think again. More Americans listen to podcasts than ad supported streaming music from Spotify and Pandora. And as the number one podcaster, iHeart's twice as large as the next two combined. So whatever your customers listen to, they'll hear your message. Plus, only iHeart can extend your message to audiences across broadcast radio. Think podcasting can help your business? Think iHeart streaming radio and podcasting. Let us show you@iheartadvertising.com that's iheartadvertising.com Yo.
- [37:40]
Dan Flores
K Pop fans, it's your boy, Bom Han and I'm bringing you something epic. Introducing the K Factor, the podcast that takes you straight into the heart of K Pop. We're talking music reviews, exclusive interviews, and deep dives into the industry like never before. From producers and choreographers to idols and trainees, we're bringing you the real stories behind the music that you love. And yeah, we're keeping it 100, discussing everything from comeback facts and concepts to the mental health side of the business. Because K Pop isn't just a genre, it's a whole world and we're exploring every corner of it. And here's the best part. Fans get to call in, drop opinions, and even join us live at events. You never know where we might pop up next. So listen to the K factor on the iHeartRadio app, Apple Podcasts, or wherever you get your podcast. This isn't just a podcast, it's a movement. Are you ready? Let's go. Let's go.
- [38:40]
Clayton English
The American west with Dan Flores is the latest show from the Meat Eater Podcast Network. Hosted by me, writer and historian Dan Flores and brought to you by Velvet Buck, this podcast looks at a West available nowhere else. Each episode I'll be diving into some of the lesser known histories of the West. I'll then be joined in conversation by guests such as Western historian Dr. Randall Williams and best selling author and meat eater founder Stephen Rinella.
- [39:10]
Greg Lodd
I'll correct my kids now and then where they'll say when cave people were here. And I'll say, it seems like the.
- [39:16]
John Hope Bryant
Ice Age people that were here didn't.
- [39:18]
Greg Lodd
Have a real affinity for caves.
- [39:20]
Clayton English
So join me starting Tuesday, May 6, where we'll delve into stories of the west and come to understand how it helps inform the ways in which we experience the region today.
- [39:32]
John Hope Bryant
Listen to the American west with Dan Flores on the iHeartRadio app, Apple Podcasts or wherever you get your podcasts.
- [39:39]
Greg Lodd
I'm Clayton English. I'm Greg Lodd and this is season two of the War on Drugs podcast. Sir, we are back in a big way. In a very big way. Real people, real perspectives. This is kind of star studded a little bit, man. We got Ricky Williams, NFL player, Heisman Trophy winner.
- [39:55]
John Hope Bryant
It's just the compassionate choice to allow players all reasonable means to care for themselves.
- [40:01]
Greg Lodd
Music stars Marcus King, John Osborne from Brothers Osborne.
- [40:05]
Dan Flores
We have this misunderstanding of what this.
- [40:08]
John Hope Bryant
Quote unquote drug thing is.
- [40:10]
Greg Lodd
Benny the Butcher, Brent Smith from Shinedown got Be Real from Cypress Hill, NHL enforcer Riley Cote, Marine Corvette MMA fighter Liz Caramouche.
- [40:20]
John Hope Bryant
What we're doing now isn't working and we need to change things.
- [40:23]
Greg Lodd
Stories matter and it brings a face to them. It makes it real. It really does. It makes it real. Listen to new episodes of the War on Drugs Podcast Season 2 on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. And to hear episodes one week early and ad free with exclusive content. Content. Subscribe to Lava for Good plus on Apple Podcasts.
- [40:55]
John Hope Bryant
Do the wealthy pay taxes? I guess I'll mix these two. Okay, do the. Worth it. Because I want to deal with the Warren Buffet quote, and I know Warren. I mean, they're not like, buddies. But I do know him. I see him at least once a year, and I got images. I remember one day I was going to a conference and speaking, and I didn't know what the conference was. I just went there as a favor to a friend, and I just got married. And that's when, you know, when you marry the right person, when they on their honeymoon, goes to a business conference with you, and it's like, just cool with it. So we go to this conference in the middle of, you know, no place, and I can't name the conference. Sorry. And we walk in this double beds, and I called the front desk. It was a little in, like, look, I don't mean to be, like, rude or whatever, but we just got married. Can we at least get a queen bed? Like, no, I'm so sorry. You know, we're sold out, but we can get you someplace two or three miles down the road. I'm like, well, let me go register and think about it. I don't be like a, you know, burden here. Let me talk to my bride, and I'll get back to you. So I went to the. To the, the. The sink to wash my hands, and there was no hot water, but, okay, one thing leading to the other. I walk out the door, turn right, which means the sink was facing the next bedroom. The next door, the next door neighbor would have shared the same sink as mine because that's how they build properties. So my hot water's not working. Their hot water's not working. So I turn out, I turn, go out the door, and I turn right. Coming out that door, Warren Buffett. I look at him. I look at Shaitra. I turn around, not saying a word. I go back into the room. I call the front desk. I said, you know what? I'll stay right here. No problem whatsoever. Got to hang out with Warren Buffett and pick his brain and get to know him. He's a really nice guy and his family. But Warren Buffett has a number of great quotes, right? One of them is, well, this Is not a great quote. This is something he talks about that he thought it was a shame that his secretary paid more in taxes than he did. Well, he meant, I believe tax rate. So that is correct. But let me get into this because it's more complicated. So the wealthy often pay taxes differently. Not necessarily less, but maybe later and in a different form. And this is a really important section for you to pay attention to. So this is called the, the buy, borrow and die strategy, right? So I've just told you, you buy assets like real estate or you or marketable securities like really good quality stocks and things like that. You modestly borrow against them because that allows you to live and do stuff you want to do and reinvest. But you do that modestly, okay? And then you die and you plan for your death. And guess what you're not doing in that example? Paying taxes. Now you're going to end up paying taxes or your heirs will end up paying taxes. I'll get in that in a minute. But look, fair exchange is no robbery. What I just told you is not illegal. That is the tax. As long as you're respecting the tax code, you have a proper accountant and not playing games with the federal taxing agencies, then what I just told you is completely legal. This is the buy, borrow and die strategy. That's what a trust is for. It's estate planning. So you want to buy appreciating assets, borrow against them tax free, die and pass on stepped up basis to your heirs. A stepped up basis means basically what happens after you remove the debt and all that stuff. It's less. So if you have a dollar that you're going to sell an asset for, you're going to pay taxes on the dollar. But if there's, the only thing that's left is 20 cents, then you're going to take pay taxes on the 20 cents. Okay, I'm confusing myself here or not being clear to you, but I trust that you're really smart so you'll catch this on replay. You're going to. So capital gains versus earned income tax rates. This is really important. Why the rich prefer capital gains. Now we're talking about me. Rich and wealthy, 15 to 20% over salary, which is 37%. I'm talking about the use of trusts, foundations, limited liability corporations. Philanthropy is a tax strategy. Dynastic wealth via Gratz, G R A T S Gratz and estate planning tools. So the wealthy pay less in percentage terms, not necessarily in total dollars. This is the game that politicians play often, by the way, so there's a myth. Let's burst some myths here. Rich people don't pay taxes. No, not true. In fact, the wealthy pay most of the taxes, but they pay a much lower tax rate. Okay, John, what did you just say? That made no sense, right? Okay, so if you are. You own some real estate. Let me give it. I'm going to give you my own example. So I bought a piece of real estate in LA for, you know, $200,000. Then it went down to 100 and some odd thousand dollars in the economic crisis 2008. I let, I held onto it. Poor people just sell, sell, sell. But everybody was telling me that was broke, so I listened. I didn't pay attention to them because they hang around nine broke people. You'll be the 10th. I kept a hold of it. Several years later, six years later, I wanted to buy a piece of real estate. Cost $750,000. Where do I get $750,000 from? Okay, I. Let me figure out where I'm getting it from. I want to buy this property. So I. I call a friend of mine in Los Angeles, a real estate broker, a brother actually, named Low, who's. Who's just absolutely great. And I asked him, I know Daniel Lowe is his name if you want to use a nice real estate agent in la. And his wife is Jennifer Low. And I knew her, and so I got to know the son. So anyways, this real estate agent named Daniel Lowe, and I said, look, this is my property and I'll tell you the address at 7122 Lati Hara in Los Angeles. And it's a townhouse, and I want to sell it. What can you get it for? Keep in mind, I bought it for 200,000 and change. He said, oh, probably 750. I said, excuse me, what'd you say? He said, yeah, I can probably get you $750,000. Not pesos. Yes. How soon can you sell this? Oh, I can probably sell this in a week. Really? We listed it, it was sold within a week, had an offer within a week. It took a minute to close, and then when I got the 750 transferred to me. Thousand dollars. I'm not a genius here. I'm not a rocket scientist. This is the power of real estate. I keep telling you. The number one way you build wealth is home ownership. I did nothing but buy and hold. And somebody rented this place out to me when I wasn't there. I moved to Atlanta, and it was a police officer, black police officer in lapd late on Paying rent by the way, it was fine. And all I had to do was just pay the property taxes once a. I was, you know, fine, but you know, it's my asset and I sort of put it on set and release. I forgot about it really. And other than chasing this guy for rent anyway, several years later I bought again. Sold it for what, three times what I paid for it. Okay, here's the magic. Through a 1031 tax free exchange, I was able to take that 750, transfer it to another state within a year, buy another asset, tax free. Hello, John Bryant to your head. Hello. Did that, did that ring true? Zero taxes. As long as that's a 1031 tax free exchange that's available to everybody. If you do it within a year, real estate to real estate, you pay no taxes. In fact, if you, if you have a single family home and you sell that home, this is now this is just Main street capitalism here. You sell that home and you're a single person. I believe you have profits. A capital gains profits means a gain on capital versus a gain on income. Income tax 37%. Capital gains tax 20%. 15%. 20%. I'll get to the difference in that in a minute. You want to be in the capital gains side, right? I have a very wealthy friend of mine who got upset when I tried to bring him a business deal. He said, I don't want to make any more money. I've already made as much money. I'm just trying to manage what I've got. Because if I make some money I got to pay 37% plus the city, the state and city taxes might be as much as 50% in the state of California of every dollar you make. I'm not trying to do that. But if I just manage the assets I've got and I sell, buy and sell assets on a capital gains basis, I'm paying 20%. It's just smart, right? You should try to legally, legally properly decrease your tax burden as much as you can and pay what you legally are obligated to. When I paid my first seven figure tax bill, I was very honored to do it. Paying taxes means you're making money, you're building wealth. It's a complement to the capitalist system. The compliment to you, don't get angry because you got to pay taxes. Just prepare for it. What you do not want to do is be in a fight with the irs. Back to the story. Or the Franchise Tax board, which I've been in a fight with before, is not fun. They will just Come and take your stuff. That's true. Gangster. They don't play. So if you're a single person, you can get up to $250,000 tax free money. When you sell a house married, up to $500,000. Now check with your tax pro. I'm giving you general advice, okay? Or go to my, one of my Hope Financial coaches at Operation Hope. Now, if you make less than $47,000 a year as an individual or $94,000 a year as a couple, your capital gains tax is zero. See, this works. It works for people, right? And if you make between $47,000 and $518,000 single or $94,000 to $583,000 as a married couple filing jointly, then your capital gains tax is about 15% to. Well, about 15%, which is a bargain. If you're me and all of my friends, you're going to pay 20% capital gains tax. And you might pay a little modest something on a state level. I know I did in Georgia. But 15%, 20% is even still a great deal. Now here are the places where they're so, okay, so if you're, if you're making a living, that's what they call it, making a living. Then you're earning a paycheck with a W2 or a 1099. 1099 is a contract income. They don't take any taxes out. But you got to remember to take your own taxes out. Otherwise the federales will be coming to get you. Okay? If you're earning an income, it's a W2, right? So you're cashing the check, you're not writing it. This is another example. I guess if you're a capital gains person, you're writing the check. Generally Speaking, if you're W2, you're cashing the check. W2 is a lower tax amount, but a higher tax percentage. Okay. Capital gains is a lower tax amount as a percentage and a higher tax amount. Here are some states in how they treat taxes. California charges you 13% on your capital gains. They treat it like ordinary income. California, where I was born, is gangster, right? No special deals, no special rates. New York, same thing. They tax it. Your capital gains, ordinary income up to 10.9%, plus a new York City tax. Texas, California. So Texas, Florida, Tennessee, no state income tax. That's why people love living there. So you only pay federal capital gains tax. Arizona, Georgia, North Carolina, they do not tax capital gains, but they have a flat or moderate income tax, which is why I told you I paid A moderate tax in Georgia over. By the way, once you pay that tax, you start looking at your potholes and all kind of stuff. You're like, hey man, start writing letters, get, fix this stuff. Your council person, your congressperson, hey man, that's me. Like I just paid taxes. Fix this stuff. Right? You start becoming real concerned. So yeah, now let's get into some, some, some of the, I'm just going to run through this stuff really quickly. The 15% capital gains tax applies at the federal level for most Americans who earn less than a half million dollars a year. Your total tax bill is going to just go to your tax. Again, go to your tax pro. Okay, so here's what the federal government tells about who pays what. So when your friends say, you hear these politicians say rich people don't pay taxes, it's a lie. Now they may not pay their fair share of taxes and there are a lot of tax loopholes. And there's some things that need to be addressed in my opinion, particularly on Wall street where people are getting away with things. But the reality is this. The top 1% of earners, which includes me, pay about 40% of all federal income tax. The top 10% of earners pay roughly 70% of all federal income tax. The bottom 50% of earners pay about 2 to 3% of all federal income tax. It doesn't that feel fair? I mean that, that's not, that's not bad because of, and how is this the case? Because the U.S. federal income tax system is progressive. Higher earners are taxed at a higher marginal rate, up to 37%. So if you're earning money then, then they're, they're getting it from your earnings. What they're, but, but they, but they want to reward investment. This is a whole nother conversation for another time. Holding investments and all that kind of stuff. And, and I mean, so again, making money or building wealth, the, the effective tax rate is what someone actually pays after deductions, credits, loopholes, not just the top line rate rate. So many ultra wealthy individuals pay lower individual effective, lower effective tax rates than the middle class workers. Why? They earn capital gains, not salaries, again 15 to 20% versus 37%. They use legal tax shelters like foundations, real estate, depreciation carried interest, which is for private equity and hedge fund managers. And I think that is an issue that some would argue needs some more attention paid to borrowing against assets. Assets I talked about margin accounts and security insecurities backed lines of credit. So when Warren Buffett says that he pays a lower tax rate than his secretary is because most of his income is from capital gains and dividends. Okay, is the light on in your head now? Like, oh, okay, now I get it. Some ultra wealthy pay almost nothing legally. All right. You know, Jeff Bezos, Elon Musk, other billionaires paid little to no taxes in some years. This was, this wasn't illegal. They simply didn't realize taxable income. Instead, they borrowed against their stock. They used depreciation and claim investment losses. As long as it's legal, it's all good. Now, I could go deeper into that topic, but I really want to make sure I'm covering everything for you in this particular episode. And so let me deal with structures.
- [57:12]
Bom Han
Run a business, and not thinking about podcasting. Think again. More Americans listen to podcasts than ad supported streaming music from Spotify and Pandora. And as the number one podcaster, iHeart's twice as large as the next two combined. So whatever your customers listen to, they'll hear your message. Plus, only iHeart can extend your message to audiences across broadcast radio. Think podcasting can help your business? Think iHeart streaming radio and podcasting. Let us show you@iheartadvertising.com that's iheartadvertising.com Yo, K Pop fans.
- [57:43]
Dan Flores
It's your boy, Bom Han, and I'm bringing you something epic. Introducing the K Factor, the podcast that takes you straight into the heart of K Pop. We're talking music reviews, exclusive interviews, and deep dives into the industry like never before. From producers and choreographers to idols and trainees, we're bringing you the real stories behind the music that you love. And yeah, we're keeping it hunted, discussing everything from comebacks and concepts to the mental health side of the business. Because K pop isn't just a genre, it's a whole world. And we're exploring every corner of it. And here's the best part. Fans get to call in, drop opinions, and even join us live at events. You never know where we might pop up next. So listen to the K factor on the iHeartRadio app, Apple Podcasts, or wherever you get your podcast. This isn't just a podcast. It's a movement. Are you ready? Let's go. Let's go.
- [58:43]
Clayton English
The American west with Dan Flores is the latest show from the Meat Eater Podcast Network. Hosted by me, writer and historian Dan Flores, and brought to you by Velvet Buck, this podcast looks at a West available nowhere else. Each episode, I'll be diving into some of the lesser known histories of the West. I'll then be joined in conversation by guests such as Western historian Dr. Randall Williams and best selling author and meat eater founder Stephen Rinella.
- [59:13]
Greg Lodd
I'll correct my kids now and then where they'll say when cave people were here. And I'll say it seems like the.
- [59:19]
John Hope Bryant
Ice Age people that were here didn't.
- [59:21]
Greg Lodd
Have a real affinity for caves.
- [59:23]
Clayton English
So join the Join me starting Tuesday, May 6th where we'll delve into stories of the west and come to understand how it helps inform the ways in which we experience the region today.
- [59:35]
John Hope Bryant
Listen to the American west with Dan Flores on the iHeartRadio app, Apple Podcasts or wherever you get your podcasts.
- [59:42]
Greg Lodd
I'm Clayton English. I'm Greg Lodd and this is season two of the War on Drugs podcast. Sir, we are back in a big way. In a very big way. Real people, real perspectives. This kind of star studded a little bit, man. We got Ricky Williams, NFL player, Heisman Trophy winner.
- [59:58]
John Hope Bryant
It's just the compassionate choice to allow players all reasonable means to care for themselves.
- [60:04]
Greg Lodd
Music stars Marcus King, John Osborne from Brothers Osborne.
- [60:08]
Dan Flores
We have this misunderstanding of what this.
- [60:10]
John Hope Bryant
Quote unquote drug thing is.
- [60:13]
Greg Lodd
Benny the Butcher, Brent Smith from Shinedown Guy. We got Be Real from Cypress Hill, NHL enforcer Riley Cote, Marine Corvette MMA fighter Liz Caramouche.
- [60:23]
John Hope Bryant
What we're doing now isn't working and we need to change things.
- [60:26]
Greg Lodd
Stories matter and it brings a face to them. It makes it real. It really does. It makes it real. Listen to new episodes of the War on Drugs Podcast Season 2 on the iHeartRadio app, Apple Podcasts or wherever you get your podcasts. And to hear episodes one week early and hey, ad free with exclusive content. Subscribe to Lava for Good plus on Apple Podcasts.
- [60:58]
John Hope Bryant
So the wealthy use trusts, foundations, limited liability corporations, right? And then you have a tool like this grat. I mentioned the grat, okay? They use it to minimize taxes, preserve wealth and shape their legacy. I'm just going to do this real quickly. So a trust is a legal entity that holds assets on behalf of beneficiaries. You wealthy individuals use various types of trusts. This is used to avoid probate, which is an argument basically after you die through the court system. And it's very expensive with a lot of lawyers. The public court process basically settles your estate. If you have a trust, it's sorted because you've sorted it out in advance. You've told everybody what you want, you've dealt with the tax issues. It's just, it's like you're alive. The trust is like you're alive, even though you passed on. And it minimizes your estate taxes. I have a trust, by the way you control how and when your heirs receive their money. Common types of. Common types used by the wealthy. An irrevocable trust. I had a friend of mine who had an irrevocable trust in, after he passed, someone he loved very dearly, basically had to go and negotiate with other members of their family. Of the family. I don't, I don't want to get too specific because I don't want anybody to guess who this is. But they had to negotiate with other members of family on assets because the trust has been put in place 20 years before and one group was targeted and there was an assumption that somebody else was going to be okay. And so the primary person in this person's life was not okay, actually. So irrevocable trust, you really need to know what you're doing before you use one of those. You move assets out of the individual estate out of an individual's estate, lowering estate tax liability. But it's irrevocable. There's a revocable trust also, by the way, Grantor trust. Let the grantor pay taxes on trust income, allowing the assets to grow untouched inside the trust. That sounds, that's exactly what that sounds like. Like, so if I put something in a trust, I'd pay the taxes on the trust income. Dynasty Trust, designed to last for multiple generations without incurring estate taxes at each generational level. Especially powerful in states that allow trust to last for hundreds of years or more in this deep. This is the Dynasty Trust. That's again, just gangster. I wish I had time to go into detail on these things. You can tell me you want me to do another podcast because we're coming on the one o' clock, the one hour mark here. If you want me to go deeper in one of these areas or some of these areas, I will, but I don't want to bore you. If you like, John, get on with it. Private foundations, these are. These are not like Operation Hope. It's not a. Operation Hope is a 501c3 nonprofit, public nonprofit. I don't own the nonprofit. I founded it, I run it. But the $4.5 billion I've run through Operation Hope. Nope, I don't own that. And they could technically could fire me tomorrow. The board of directors that I put in place. Right. Many founders have been founded by the. Been found, been fired from their own situation. So another discussion, another day. So a private foundation, these are nonprofit entities that wealthy individuals or families fund themselves. I want you to think about now the Gates Foundation. Why do you want to use them? The donor gets a tax deduction for contributing to the foundation up to say 30% of adjusted gross income. The foundation has only only has to distribute 5% of its assets each year to charitable causes to keep it legal. The rest can be invested and managed often by family members and advisors. Now don't feel a certain kind of way, they can't put the money in their pockets. But they can keep this perpetually going and just take, if it's $100 million private foundation, they can just give out $5 million and it's legal for them to just reinvest the rest. But the public got the benefit of $5 million of charitable activity. And this money's not available to this individual or person or family to use to go buy Bentleys and all kind of lifestyle stuff. So I want you to understand that one of the benefits of this is legacy and brand control. The family's name lives on while funding causes that they can care about. It's giving with intention and tax efficiency. I love this next vehicle. Llcs. I have a bunch of them like a, like a boatload of LLCs. Limited Liability Corporations. Wealthy individuals and families can often place real estate investment portfolios or even businesses inside a limited liability corporation, then transfer interest in the LLC to heirs or trusts. I cannot recommend this enough. They're simple, they're easy. Often one page to design. I had 700 homes when I used to own the Promise Homes company. Just under 700 homes. And my ultimate goal was to get each one of those homes in an individual llc. I didn't get, I didn't get to that point because I was buying homes a bunch at a time. But I would certainly have a group of homes in a separate llc. So if something happens that, that that LLC gets sued or there's some issue with that or there's a legal fight, then you, then you can only punch through to that limited liability corporation. You can't punch through that to get to my other assets, other properties that nothing to do with that. And you can't get to me. I ain't got nothing to do with it. It was, you know, you trip and fail on in that home and you can sue for recompense with regard to that property. Although you'd hope that you can work something out and not get into lawsuit. I've been in a lawsuit in all the years I've been in business. I try to work it out now. So here's the benefits of an llc, Asset protection again, lawsuits, divorce, et cetera. Now you can't sign something personally. You can't do a mortgage and sign it personally, then retroactively put it into a limited liability corporation and then tell the bank that you can't come at me. No, you sign that personally. You personally guarantee it. You just put it inside of an llc. So if somebody's suing later, I guess the asset may have some protection. I think about this. Yeah, I have a. Yes, I have a property in the LLC that I personally guaranteed the mortgage. The company would come after me, the bank would come after me if I defaulted. Yes, but somebody suing because it was some tied to that property, you could only get. Yeah, you couldn't punch through to me if you were suing me externally, but certainly the debt would be mine. In that example, you see, I'm doing this in real time, like so this is like as honest and direct as it gets. So asset protection valuation discounts. Interests in LLCs are often minority or non controlling, meaning their value for estate gift tax purposes can be reduced by 20 to 40%. Talk to your tax pro, they'll know what I'm talking about. If you're giving 10% to your daughter, 10% to your son, that's what I'm talking about. Right. There's some real benefits there from tax planning purposes. It helps with succession planning and managing family business business assets under a unified structure. It keeps everything really clean and elegant. Philanthropy is a tax strategy. This is my social impact playbook. Wealthy families use philanthropy not only to do good, but to offset income taxes through charitable deductions. I've done that. It's a good thing. America is the most philanthropic country in the world. Is it because Americans are better people?
- [68:36]
Greg Lodd
No.
- [68:37]
John Hope Bryant
Okay. It's because the tax structure incentivizes philanthropic contributions. The tax structure incentivizes home ownership as an example. That's why 75% of of whites in, in the country own homes. And as soon as you're financially literate, you listening to this? I'm convinced you're going to own a home and you're going to do the things I'm talking about because you're incentivized to do it. And it's very simple. You want something to grow, you incentivize it. You want something to, to, to die and you want to stop it, you penalize it. I used to write, I still ride bicycles, but I love, I had this carbon fiber bicycle and I loved it so much. I wanted to Travel with it. So I would take that bike to Maui with me, and I'd go to the Delta counter and I'd say, here's my bike. It's in a bike bag. I want to ship this to Maui, Hawaii. And they look at me crazy because it's big and bulky. Okay, Mr. Brian. And we're gonna do it for free because we like you. But then I did it several times a year. They're like, he and a bunch of other people are doing it. Let's charge them 100 bucks each one way. And I griped and grumbled a little bit, but I said, fine, 100 bucks each way. Then they increased it to $200 each way. And then I think the $300 each way. Well, when he got to two or $300 each way, I said, nah, the bike's staying at home. And I rented a bike in Maui. And by the way, I'm more than happy renting a bikes in Maui today. But that changed my behavior. They taxed me enough to change it wasn't. They were being mean to me. They didn't want big bulky bikes that worth $10,000, $20,000 in the whole of their plane gets broken scratch charged for it, sued for it, and it left less room for them to take luggage. They weren't a bike delivery program. Right. So something they tried to do as a convenience to their passengers became something that people like me took advantage of. And they stopped it by creating a disincentive that made sense because it applies to a lot of different things. So charitable deductions are offset income. Avoid capital gains taxes by donating appreciated assets like stock so you can donate stock to avoid capital gains tax. Reduce estate taxes by moving wealth out of the estate into a charitable vehicle. Again, you want me to go deeper in some of this, I will. I'm just trying to do this very quickly. Okay, let's deal with a grantor retained annuity trust, A grat, G R A T. A grat allows a wealthy individual to freeze the value of their estate and pass on the appreciation of an asset that heirs tax free if done right. Yes, I said that. Right. And it's gangster. We'll be talking about millions and millions and millions of dollars, tens of millions of dollars for a wealthy estate, maybe even hundreds of millions, depending on how wealthy somebody is. So the person puts appreciating assets, stocks in a private company or real estate into a grant. They receive annuity payments back over a set term, let's say over five years based on a fixed IRS Interest rate rate. If the, if the asset grows faster than the IRS interest rate, which is typically low, then the excess growth passes the heirs with no additional gift or estate taxes. You can play this bag later. This is one of the most powerful estate planning to use by the ultra. By ultra wealthy families. Think the Waltons, think Zuckerberg, Meta, who's a friend of mine, think Jeff Bezos, et cetera. It's crazy. I know all these people. Not well, but I at least know them. Most of them are actually pretty nice in person. A dynasty trust is used by wealthy families to preserve wealth across multiple generations while minimizing or eliminating the estate gift taxes over time. It's one of the most powerful tools for creating multi generational wealth. Again, we don't have time to. I'm at an hour now, if I bored you couple of benefits. Normally with wealth is passed down, it's taxed at each generation. Okay? 40% federal. Federal estate taxes. Ouch. 40%. Okay, so I'll say that again. When wealth is passed down, it's taxed at each generation, okay? A dynasty trust locks in wealth now and future generations benefit tax free because the asset never legally enters their states. Did you get that? It protects assets from creditors, divorce and lawsuits because the trust owns the asset, not the beneficial. Those assets are shielded from creditors or bankruptcy, divorce settlements. Poor decision making by heirs. This creates a financial firewall for the family. You can set, you know, you can set your own detailed rules. Money only released. You can say money's only released for educational purposes or health and housing or starting a business. It prevents trust fund baby syndrome where heirs don't blow the fortune because they never learn how to work and they figure they can just chill forever. By the way, it's a joke. First generation makes it it, second generation spends it, third generation loses it often. So this, you can encourage people to work and do stuff because you can limit how much money that goes to them. It often guided by a trustee or a family member. By the way, Shaq I think was Shaq said when his kid said, man, daddy, why are we working? We rich. We rich. He says, no, no, I'm rich. You gotta go to work, right? It often is guided by trustee or family member. Family office, not a family member. Maintaining oversight site, family office. You want me to deal with that in the next. The next podcast. There's so much to go over. It takes advantage of current gift and estate tax exemptions. In 2025, the estate tax exemption may be reduced significantly, by the way, from 13.6 million to 7 million. Most people listening to this going, what do I care? I don't have 7 million. But for somebody like me, what I just told you is relevant. Families are using dynasty tax trusts now to lock in the larger exemption before it's sunset. So basically they're doing, they're creating these trusts, like right now in a hurry, before the of 2025. So they get the benefit of basically $14 million worth of coverage versus $7 million worth of coverage. Once in the trust, that wealth can grow indefinitely outside the taxable estate. Benefits from growth over time. Assets placed in a dynasty, in a dynasty trust can be invested, growing for generations. No estate tax drag. So the compounding of power is much stronger than in a taxable estate. What I tell you, you make money during the day, you build wealth in your sleep. All right, I can go on and on and on. But basically a dynasty trust is how the wealthy play chess, not checkers. It's not just about giving your children money. It's about giving your family a foundation for a hundred years. Hello, I'm not gonna get this right, but Warren Buffett once said that he wanted to give his children enough money so they never wanted for anything, but not so much that they didn't want to do, did not want to do anything. He wanted to give them purpose and dignity and all that stuff, but not a free ride. He wanted them, you know, he wanted them to not suffer, but he didn't want them to be spoiled brats. And I think he succeeded. The kids are pretty cool people, the ones I've met. I think I met all of them. Okay. I hope that I've covered, I hope I've done this, this some, some justice. I really want to cover these margin accounts and the lines of credit and how wealthy people can go broke. That was a really important thing for me to cover. I think I covered decently the trust foundations and LLCs in taxation that most, most taxes in this country are paid. Like 70% are paid by the wealthy. So you can tell politicians when they say this, you're lying, you're lying, you're lying. John Bryant told me that actually the wealthy pay most taxes, but percentage wise, they don't. And, and because of loopholes, they probably, we probably should be paying more. I mean, once you get into a tax conversation, I mean, you got, when you're wealthy, you have a whole team of people who do nothing but sit down, try to figure out how to avoid unnecessary taxation legally. And some people push it too far. They're taking money offshore and all that stuff. You go to jail for that kind of stuff. Some people just say, I don't. You know, they say some of these celebrities you've seen, I don't owe any taxes, that taxing is a legal system. When they didn't end up literally in prison like they thought because they were celebrities going to save them. No, they literally ended up in prison. Wesley Snipes and a bunch of other people. So don't do that. All right, this is John o' Brien. This is Money and Wealth on the Black Effect Network. Thanks for making this a top 100 podcast and business in the country, top 40 for entrepreneurship. Thanks for giving me some love. I want you to get my book Financial Literacy for all. Thanks for your support. If you involved in Green Socks Day, it'll be back next year. By the way, if you missed it this year, get my book, which now in paper book, paper book paperback back. Right? Tell your friends to follow this podcast and also go to Operation Hope and sign up, download the Hope and at Hope in Hand app and sign up for financial coaching. If you tell them I sent you, they give you a thousand dollar scholarship for coaching and counseling on me. That'll get your credit score up, your debt down, your savings up so you can start building wealth again. I want you to, I don't want you saying you hate rich people. I want you to be rich one and then I want you to focus on then once, once you can become rich, I want you to start being focused on becoming wealthy. My mother, Juanita Smith, God rest her soul, worked an hourly job for 32 years. The the mother of Juanita's mother of Mara Hoskins and Donnie Dave Darnell Harris, my brother and my sister, my brother and myself. My dad was Johnny Will Smith. Arlene Hayes was my half sister. She's gone to glory. My mother worked for 32 years at Boeing Aircraft, McDonald Douglas Aircraft, which became Boeing Aircraft merger and making 15, 18 an hour. Had a great credit score. Did not have generational wealth so she had to hustle. So she made money during the day. She had a part time income from making handicrafts and things. She used a part time income to save a down payment to buy a house. She bought her first house, then sold that one for profit, bought a second one. She did that seven times and she even downpay, gave a down payment to my brother and my sister, gave me an emergency loan when I needed it, paid her back and she died with a million dollar net worth and a credit score over 700. It was only was it dropped from 850 because she wasn't using credit anymore in the later parts of her life. But she had lived a life of self determination. She built a generational wealth at a will. Her will was gangster by the way. It basically said anybody argue with his will is cut out of it. So she created her own form of a trust in a very tight will. And the way she structured there was not no taxing issues. But anybody can create a trust. You can create a trust. You don't to be wealthy to do it you should at the least have a will and you should have life insurance. Whether you can't get whole life get term. All right. Love and Light John o' Brien let's go do this thing. Financial literacy is a civil rights issue of this generation. When you know better, you do better. Peace and Light no days off. That's my T shirt. Today.
- [79:40]
Greg Lodd
Foreign.
- [79:45]
John Hope Bryant
Wealth with John o' Brien is a production of the Black Effect Podcast Network. For more podcasts from the Black Effect Podcast network, visit the iHeartRadio app, Apple Podcasts or wherever you listen to your favorite shows. In a world of economic uncertainty and.
- [81:31]
Bom Han
Workplace transformation, learn to lead by example from visionary C suite executives like Shannon Schuyler of PwC and Will Pearson of iHeartMedia.
- [81:41]
John Hope Bryant
The good teacher explains the great teacher inspires.
- [81:45]
Dan Flores
Don't always leave your team to do the the work that's been the most important part of how to lead by example.
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Bom Han
Listen to leading by example executives making an impact on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.
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Clayton English
Why is a soap opera western like Yellowstone so wildly successful? The American west with Dan Flores is the latest show from the Meat Eater Podcast Network. So join me starting Tuesday, May 6, where we'll delve into stories of the west and come to understand how it helps inform the ways in which we experience the region today.
- [82:25]
John Hope Bryant
Listen to the American west with Dan Flores on the iHeartRadio app, Apple Podcasts or wherever you get your podcasts.
- [82:32]
Bom Han
We love learning about this extraordinary universe.
- [82:35]
John Hope Bryant
And we love sharing what we've learned.
- [82:37]
Bom Han
And on our podcast, Daniel and Kelly's Extraordinary Universe. Universe. That's what we're gonna do.
- [82:41]
John Hope Bryant
I'm Daniel, I'm a particle physicist and I think our universe is absolutely extraordinary.
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Bom Han
I'm Kelly Wienersmith, I study parasites and there's just endless things about this universe that I find fascinating.
- [82:51]
John Hope Bryant
Basically, we're both nerds.
- [82:53]
Bom Han
Each Tuesday and Thursday we take an hour long dive into some science topic.
- [82:57]
John Hope Bryant
Learn all about our amazing and Beautiful Universe on Daniel and Kelly's Extraordinary Universe every Tuesday and Thursday on the iHeartRadio app, Apple podcast Podcasts or wherever you get your podcasts. Hey, I'm Dr. Maya Shankar. I host a podcast called A Slight Change of Plans that combines behavioral science and storytelling to help us navigate the big changes in our lives. I get so choked up because I feel like your show and the conversations are what the world needs. Encouraging, empowering, counter programming that acts like a lighthouse when the world feels stark. Listen to A Slight Change of plans on the iHeartRadio app, Apple Podcasts, or.
- [83:38]
Bom Han
Wherever you get your podcasts.
- [83:43]
John Hope Bryant
You're listening to an iHeart podcast.