In this insightful episode of the Generations of Wealth Show, host Derek Dombeck welcomes Brett Swarts, founder of Capital Gains Tax Solutions, to challenge the traditional 1031 exchange and unveil a more flexible, investor-friendly strategy: the Deferred Sales Trust (DST). Brett shares how DST empowers investors to defer capital gains taxes, diversify investments, and most importantly—reclaim their time and freedom. Through powerful stories of clients who exchanged active property management for peace of mind and increased cash flow, Brett makes the case that building wealth should never come at the cost of your family or lifestyle. If you’ve built up significant equity and are looking for a better way out, this episode is your roadmap.
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Intro to Deferred Sales Trust vs 1031 Exchange
Welcome to the Generations of Wealth show. I am your host, Derek Dombk. And you know, a couple episodes ago, we were talking about 1031 exchanges on a great way to offset or defer capital gains. Possibly for an infinite period of time. Well, here is another strategy and some would even say better strategy for tax deferral. And it’s, uh, it’s really awesome. I’m looking forward to bringing on Brett Swarts. Before that, I really.
Really, always wanna take our time to thank you for listening to the show, helping us grow it any way you can. If there’s ever anything I can do for you, don’t hesitate to reach out, go to thegenerationsofwealth.com to see everything we have going on, to contact us or shoot me an email directly, derrick at globalgow.com. And again, thank you. So with that, let’s get started with the show. And with no further ado, Mr. Brett Swarts, thank you for joining us today on the Generations of Wealth show. Welcome, welcome, welcome.
Derek, pleasure to be here. Thanks for having me. Absolutely. Would you mind giving us a little background on who you are, where you come from, and then we’re going to talk about deferring taxes. Yes, absolutely. Thank you so much. So I grew up in originally from tax-a-fornia in the, in the heyday of when business was really great and awesome to be able to do there with real estate. and helping people develop and build houses with my parents. And so I fell in love with real estate at a very young age. And then fast forward, had a chance to go and practice multifamily brokerage at a place called Marcus and Milla Chap. And that’s where I got introduced to underwriting and negotiation and 1031 exchanges and capital gains tax referral. And basically just building wealth with not just with the brute force of development, but with the mind and structuring and finance and all those things.
Problem with 1031 Exchanges
And so I fell in love with that another level within the 2008 crash, like a lot of people happened during that time, things really changed and also you have a chance to learn a lot. So I had a chance to learn a lot during that time period and really just see the pain of friends, family and clients losing half or all of their wealth, mainly due to the 1031 exchange and having to overpay, feeling like they had to overpay and making poor decisions because time was not on their side.
And during this time as well, wife and I are newly married and our first baby daughter on the way. And so you do whatever entrepreneur real estate wannabe does. You can get a side hustle. My side hustle is cheesecake factory nights and weekends. And by day I negotiate with banks and help my clients hold onto their properties and renegotiate their tax assessments.
Deferred Sales Trust (DST) Overview and Advantages
Fast forward, I learned about a strategy that basically could have avoided and prevented all of the pain from all of these large, large multimillion dollar exits from my clients. And it would have eliminated the need for the 1031 exchange. And it would have eliminated the anger, the frustration, the, all of the things that we as investors in real estate love to have on our side for the seller, right? We’re gonna have a buyer in a, in a position where they need to buy something. That means we get a higher price, right? We always want to try and make a fair and equitable deal, but Unfortunately, 1031 exchange puts people on these, these binds. so instead of being forced into these 1031 exchanges, we learned that you can use something that we’re going to teach you today that gives people freedom and flexibility to unlock truly passive income, to get time on their side, to be able to diversify, but also to go back into real estate when the market makes sense. Because the reality is in 2008, it took about three years for the bottom of the market to actually shift in real estate. And during that time period, we, needed a chance get out of debt, have liquidity, have diversification.
Netflix vs Blockbuster Analogy
We truly believe we found what’s called the Netflix version to the old blockbuster method of exit planning. And then once you understand this, you’ll never go back to the old blockbuster 1031 exchange ever again, unless you have a perfect deal lined up and then you can do that. But otherwise our strategy works for Bitcoin, business sales, real estate of any kind. And we can defer this tax and then invest back into real estate or any other investment at any time. All tax deferred. And that’s really the beauty of what we’ve been able to unlock with our strategy. Well, that’s awesome. Uh, there’s a lot of different things in there that are already getting my head spinning. Um, a couple of episodes ago, I interviewed a man named Dave Foster and he’s a 10 31 exchange expert. And, and that was part of our show. Like, yes, that tool is fantastic. However, the dates and deadlines and timelines have to line up. And I lived through that downturn of Oh seven, oh eight and got my ass kicked as many of my listeners know. But I, as I was losing everything, I was also watching other people making those, those decisions, as you just described, right? We, we need to exchange into something and they, they choose something that they really didn’t want. Um, and ultimately a lot of them lost anyways, or they had to pay the tax. Right. So, so love your background, love the opportunity to, to hear more about the tax deferral stuff. Um, Want to clarify, you got started right before the crash, is that right? Yeah, 2006. These are going great for a little while. then basically, know, you know, end of a seven ish to know eight, all of it.
Everything fell apart, so I went from making a little bit of money. like nothing overnight. I always start there because people are listening and they might be trying to get going or they be going through a tough time. And that’s how you know 99 % of the entrepreneurs that I know and real estate investors that I know how to go through a season of drought and doubt. And you know, really called the honey badger season where you’re you’re cutting all expenses and you’re just trying to keep keep thing. Keep the lights on right? And that’s where I was at one point I had to borrow $5000 from my dad just to keep know, the bills being paid and all them credit cards were maxed and our baby were living my brother in a small condo. And that was those days, right? And that was like a, that was a season of multiple years of trying to crawl on and learn and grow and but also financially flat on our back. Um, you know, now we have five kids and I guess that’s kind of the rest of the story. My wife’s been home full time with their kids the entire time. I worked multiple side hustles and careers along the way here. But now all we do is focus on helping purpose driven entrepreneurs and investors build capital gains tax exit plans to multiply freedom and impact, but also to not have to go through all of the pain and challenges when it comes to the 10 31 exchange. And by the way, I love Dave Foster. I had on my show as well. And I love the 1031 exchange when it serves the investor or the entrepreneur to multiply their freedom and impact. But when it doesn’t, if it can become a curse, right, it can become a detriment. And we’re seeing that happen right now with people who overpaid two years ago and interest rates are now adjusting and they 1031 exchange and they doubled down on their profits and they deferred their gains. But now their interest rates are resetting and now they’re losing their properties. So it’s happening all over again. And so we know the 1031 exchange is broken, but there’s 5,000 QI companies out there banging the drum of the 1031 exchange. And it’s just the old blockbuster method.
Right. so, you know, Blockbuster can still work if you want to drive to the store and rent the movie and return it in three days. But maybe you want Netflix. Maybe you don’t want to have to return in three days. Maybe you don’t want to have to invest right away. Maybe you want to go into Bitcoin at forty thousand a coin and then it goes to a hundred thousand a coin. All tax deferred after you sold a thirteen million dollar car wash in San Diego right before the interest rates jumped like one of my clients did. And also invest into hotels as the value has dropped drastically and the dollar cost average and put into the S&P 500 and the Nvidia stock and iBit and you basically work this wealth knowledge that you have, you put it into debt, we put into a lot of debt stuff along the way, and we waited for the market to shift, and now we’re buying back at a discount at 20, 30 % less than what the peaks were. All tax deferred, right? And that’s the whole point. Like once you get this concept and you understand what truly passive income can do for you, you don’t go back to the old blockbuster. I was just kind of giggling because I’m picturing how many people are listening to this show right now that don’t even know what blockbuster video was. And, uh, and you’re right. You’re a hundred percent right. Um, so how does it actually work? That’s the key.
Real-Life Case Study: Warren & Catherine
Yeah, I actually just pick a real real life deal story. Just talking about the San Diego one. I’ll say about another deal story. It was a client of mine, Warren Catherine, and they were selling a $2.5 million apartment complex in Sacramento, California, and they had a massive gain. In fact, they had done 1031 exchanges and they had sold a Manhattan Beach duplex and had moved it up into another 15 units. And this property actually was going pretty good. I mean, good tenants in a great location, fully occupied. They had property management in place, but the big thing for them, Derek, was that they still had tenants, toilets, and trash. They still had those three T’s, right? And they also had these two other T’s. Now these two other T’s were their twin daughters. And what they were finding, they were trading their two T’s, their twin daughters, for these three T’s because their time was being pooled in the direction of this real estate that’s worth $2.5 million, that’s producing about $120,000 NOI. Right? The gain itself is massive, massive. think their basis was around, you know, three or 400,000. So in tax of four, you’re looking at, 2.5 million minus about 400,000. You do the math there. Let’s just call it about maybe about a million or so in tax. Right? And so it’s this massive capital gains tax bill. And yet they’re saying, I don’t want to trade 15 units, 15, you know, you time-consuming units for 30 time-consuming units. And that’s the whole concept that’s broken with the 1031. I’ll just keep selling high and maybe hopefully buying a good deal, but just keep rolling it all over and over over again. And you to do equal or greater value, equal greater debt, just keep doubling the units. And the whole idea makes sense until it does. And you see their kids are 10 years old, they’re twin daughters, and they had them a little bit later in life. And they’re looking at this eight-year timeframe. And Warren is driving multiple hours, multiple weeks, per month, you know, back and forth. And he’s like, I’m not what am I doing? He’s like, we can retire. We can have but our income is 120,000 here. And so we built a exit plan that allowed them to not only sell that asset to for all the capital gains tax, but we increase their their cash flow from 120,000 to 190,000. But the biggest thing we did is we increase their time. with their daughters, right? And so we got them unstuck. And so that’s the first thing I want to teach everyone today is that number one, you got to get really clear on what you want. And number two, not just what you want, but what matters the most to you about what you want.
And see for Warren and Katherine, once they understood that what mattered the most to them was their two twin daughters and spending a maximum amount of time with them and getting Warren unstuck, was in the way? It was the property, even though it was a good property.
Key Concept: Don’t Trade What’s Profitable for What’s Priceless
And so the concept here is don’t trade what’s profitable for what’s priceless, right? Another way to think about it is don’t let the profitable replace the priceless. What was priceless? Their time with our twin daughters. What was profitable? The real estate, but guess what was even more profitable and exit plan that lets them diversify their wealth, pay off their debt and actually increase their cashflow. And so we increased their cashflow to about $190,000 per year. Right. We got them out of a little bit of debt, right? We deferred all of their capital gains tax, but we maximize their time with their daughters. so Warren actually shares his story and Catherine on my podcast and on my YouTube channel and they go through this whole concept and just like it’s so nice to be on this other side. We didn’t realize how much time and energy that the property really took up from us even though we had good property management and good tenants and it was very you know we actually enjoyed you know providing a service for housing but they go look it just it was our time to harvest and so that’s the big thing don’t don’t let the profit will replace the priceless.
Well it’s interesting that you talk about that story because The generations of wealth, our mantra is live your vision, love your life, which is the vision for your life, spending time with your loved ones and how important that is versus going and making another dollar. Right. So I love that part of it. Um, I may have missed something as I was, you know, kind of listening to that story. How did you, the step by step of actually deferring the tax and putting them into these alternative investments? Are you the intermediary that’s holding all the funding? Let’s talk about how this works, okay? How do we do this, right? Give me the step by step.
How DST Works (Step-by-Step)
Step number one, we build a trust and we combine it with an installment sale using IRC 453. Okay, so you sit down with myself and the tax attorney and my business partner and CPA and we build this trust. It’s kind of like a qualified intermediary. It’s kind of like an IRA. It’s kind of like a 401k. It’s kind of like these things that we know about, but it’s a different tax code and it’s combining a trust. Now it’s a business trust. It’s different than an irrevocable trust or a revocable trust. Okay. There’s a third party unrelated trustee. That’s our role. We’re a trustee company, right? And so we build this trust and let’s take Warren and Catherine’s example. It’s a brand new trust. It only does business with Warren and Catherine. And what happens is they sold their asset to the trust in exchange for the promissory note, which is step number two.
You sell it to the trust, the trust issues you a promissory note. And now simultaneously, the trust sells it to the buyer. So we found a buyer, we lined it up, we negotiated the price, got it all that, and we put option language inside of the contract, which basically allowed this three-party transaction. So watch this, Derek. If Warren and Catherine sold it to the trust for 2.5 million, and the trust bought it for 2.5 million, how much gain does the trust have? Well, my mathematician head says zero. Zero, you got it. Now, if the trust itself then pays them back over time in installments, do you see how this is just an installment sale with the trust? Yeah. We set the interest rate typically seven, eight, nine, 10 % kind of that range, okay? And basically that’s all we’re doing. We’re doing a hundred percent seller financed deal, but to the trust, not to the buyer. And why is that? Because the collateral can be secured against whatever we want it to be. And so the funds hit Charles Schwab.
The buyer buys it from the trust, they’re gone. They get title free and clear. They get everything they bargained for, so they’re out of the picture. And what’s left is a promissory note. After closing costs, I think it was around like 2.35 or so, and the interest rate, I don’t know, it was maybe eight or nine or 10%. And so now they’re getting paid back over time slowly, and then they’re paying tax slowly. And so that’s it. It’s as simple as that. Now here’s the key on all this. 28-year track record, thousands and thousands and thousands of transactions, billions and billions and billions of assets over the years. And here’s the key over 30 no change audits, state, federal and promoter audits, all of it. No change, no findings. But here’s the other reality of this. OK, even though it’s 100 percent legal works every single time, guess who doesn’t want to know about this, Derek? Well, yeah, the general the general public should not know about these types of things, according to the government.
Well, it’s not so much that as as in I would say the government allows everyone to look at the 10,000 pages of the tax code, but really it’s the real estate brokers. And by the way, I’m a real estate broker. Okay, I have my license. We’ve closed over, you know, half a billion dollars of deferred sales trust, Delaware statutory trust, 1031 exchanges, real estate transactions. Okay, they don’t want you to know about it. Two reasons. Number one, either They don’t know about it. Or if they do, they want to keep you in the 1031 exchange. Because guess what happens when the capital moves away from the 1031 world, even the 1031 exchange accommodators, especially mostly don’t want you to know about it. It gets it out of their world and it moves it over to the other world. And what’s the other world? Well, the other world is whatever they want it to be. It can be a business venture. They might want to start a lending business. They might want to do a fix and flip business like what you do. They might want to develop apartment complexes. They might want to put it into the S&P 500. They might want to buy some insurance. They might want to put it into some Bitcoin. In other words, they might want to diversify and get a well-balanced based upon their risk tolerance and their liquidity needs versus the 1031 exchange, which keeps them 100 % in real estate, not diversified, not liquid. And if they had debt, they have to replace that debt. And again, back to the other piece, why do people get in trouble with the 1031 exchange? Number one, they overpay for a property.
Number two, they go into too much debt. Number three, they typically do in a short timeframe, which doesn’t give the real estate market time to go to the bottom or time to adjust, right? And so with this strategy, we can sell, diversify, we can dollar cost average, we can buy into different assets at different times. And this is it.
Truly Passive Income vs Financial Freedom
This is it. And so the other concept I wanna leave with you here is that truly passive income is to your freedom and impact as compounding interest to your money. So once we solve the financial, the capital gains tax, we use tax flow and cash flow engineering to make this make sense. It unlocks a whole nother part of the world, right? Where people can focus on their family mission, vision and values. They can spend time with their family like you talked about. They can spend time on doing things that give them joy and impact and fulfillment, right? They’re no longer chasing this financial freedom number, which Robert Kiyosaki so wisely taught us so many years ago, but they’re really looking at a truly passive income number, which means my money truly works for my money. And I don’t have to do anything for any time or energy to swap it for money. Right. And that’s the beauty of what we’ve been able to create here. And it transforms lives. It transforms entrepreneurs lives, investors lives. most 1031 exchange commenters don’t know about it or don’t want to know about it. And your brokers don’t want you to know about it because they want to keep you in the 1031. So you got to aware of that as you’re looking at this, you got to have a mindset that says, I want what’s most important to me and my family. And if what I’m saying resonates with you, then you’ve got to look at our strategy.
No, I love it. I have heard of this in the past. But the reason that that I think it’s so important right now, especially as we’re in a changing market. And there’s been a lot of people that built up quote unquote wealth, you know, paper wealth. Over the last five years, whether they knew it or not, they bought assets. They went up a lot. And you’re right. Today is not the same as 2007 and eight, but they’re in pockets. There are definitely areas that are going down rather quickly. And I know parts of Florida are seeing it. Parts of, you know, California and Arizona and the upper Northwest. Um, we don’t see it as much in the Midwest where I am, but You’re right. People are going to start making bad, bad decisions again, and trying to do regular exchanges into properties or deals that are not deals. But here’s my question. The trust itself is making payments to the seller over time. And I’m assuming that there is all kinds of different scenarios. It’s case by case, but can the seller get all of their money early if they want to, if something in their life changes, right? They’ve got a $2 million gain taking that in installments the first Half of the question is, what’s a typical scenario? How many years do they take those installments? Or maybe there is no such thing as typical. And the number two part of that is if they all of a sudden have a need for that chunk of money, can they get it?
The answer is absolutely right. The note can be adjusted and amended to adjust the payments, either the monthly payment, the quarterly payment, or even lump sum payments. I’ll give you a couple of examples of this. First of all, let me also qualify who qualifies for this, right?
Who Qualifies for DST
You need to have a million dollar net proceeds and a million dollar gain, okay? This is where we see that it makes sense, but it can be any asset of any kind, business, Bitcoin, real estate, primary home, right? Stock, public or private stock, any asset of any kind. It could be a helicopter you’re selling, it could be a plane, okay? But it needs to have a million dollar net proceeds, a million dollar gain to qualify. Not that you can’t use the strategy for something smaller. It’s just we found that the numbers don’t make sense and really don’t really make a lot of sense unless you have a million dollar net, proceed to million dollar gain. A little caveat after that, if you have like two assets that you’re selling in a short period of time, like a six month period of time, you can combine two. So if you said, well, Brett, I got a house that’s worth 600,000 and it has a $500,000 gain. And then I have another one that’s worth, you know, 500,000, you know, or 600,000 has another $500,000 gain and I can combine those two. Yeah. Then we can make sense of that. if you only have, you know, a hundred thousand dollar gain or $50,000 gain, it doesn’t make sense with the structure. Just letting you know, we’ve done the number so many times. All right. All right. So back to, back to this. So we had a deal we disclosed up in Massachusetts. It was an automotive sale. Okay. For a couple that built it from a hundred thousand in revenue to multimillions in revenue. And it was the first tranches is about an $8 million exit.
Okay. And so we structured it with no payments for the first two years. And this is really powerful, Derek, right? And this is how we make this an investment and not an expense. We’ll talk about fees here in a second, um, because they’re in a high tax state, but they’re also young and they’re still in their working career. They’re entrepreneurs. And so they’re staying on with the company. And in fact, the only sold about 66 % of the company and they kept 33 % rolling in. It’s called the second bag of the apple, but they’re staying on and they’re getting paid, right? So they’re already in a high income tax state. They’re staying on and getting paid. And so they’re del…the income from the trust. So watch this. Although the millions of dollars are in the trust, they’ve got a promissory note. It’s accruing an interest, but it hasn’t been paid to them yet. And that’s beautiful because in two or three years when they, let’s say, finally exit from the company that bought them, then their income’s gonna drop. But guess what they can do? We can amend the promissory note to start payments. And so we call this tax flow engineering, right? Why would you wanna take extra income that you don’t need or want right away? That can be in a tax deferral state. But the cool thing is when you need the income in a couple years or six months or next month or whatever, we can turn it on again. And so think of it like a water faucet that can be turned on and turned off with mending the note and then.
You can do that. Now, second thing is they have a place in Florida that they’re planning on moving full time to. So watch this. If you’re in New York, New Jersey, Florida or Massachusetts or California, all these high tax states, you can reestablish a residency in like a Texas or a South Dakota or Florida or Nevada or whatever, right? And then when you establish that residency, the income from the trust that pays you, it is ordinary income tax on the interest payments that you receive, it’s important to understand that. But if you’re in that new state, it’s in that new state income tax, which if they have no income tax, there’s no income tax. So that’s, that’s huge.
It’s really a big, big deal right there. And then the next thing I would say is these guys are entrepreneurs. They don’t want to just be passive. Although we have great investments where people are making double digit returns, past performance, don’t guarantee your future results. They can also partner with the trust and do their own deals. And so a lot of times these strategies are very passive, meaning they think they have to just give up all of the controls and all of the investment decisions to all these third parties. And there are some controls we have to talk about here that you to give up. But the thing is you can joint venture partner with the trust and do your own transactions. We had a client who sold a $3 million business in Alabama and he built over 20 units, apartment units in Tennessee, all tax-referred. And the trust was that silent partner putting up the capital this is the beauty of this. Like you’re not stuck to be retired, but you can also be an entrepreneur. And that’s basically the flexibility of how it works.
I love that because just knowing myself, I would, I would have a hard time giving up all the controls. Like you said, we do have to talk about the controls, but you know, you want to maybe go into a different venture in your life. That’s not a hundred percent passive or how many people do you and I both know that, that retired and a year later, they’re just bored out of their mind. Yeah. And now they’ve got all the time in the world and opportunities just come to them. They want to be able to jump back in, but let’s talk about the controls.
Yeah. So I’m with the controls. So, Number one, there’s a third party unrelated trustee. I mentioned that before and that’s our company here at Capital Gains Tax Solutions. And so we’re kind of like a qualified intermediary. We’re kind of like an IRA or 401k custodian, you know, such, right? And so our role is to work with you, right? And make sure we stay within the guardrails of what the tax attorney has laid out. By the way, the tax stream provides lifetime audit defense real fast. They charge about 1.5 % of the gross sales price on the one-time fee and one point on the first million. 1.25 on anything above that. That’s a conditional. And so that’s what they get paid. We get paid as a trustee about 1.5 to 2 % on a recurring basis on the net proceeds in the trust. But we typically cashflow our fees, meaning the first 60 or so days, we’re not receiving any payment for the trustee part of it until we’ve cashflowed and made that money. yeah, so the trustee, that’s our role. We basically are the ones that need to approve of investments along with you, right? So you are the note holder, Derek, right? You are the creditor. This was your deal. And so Derek, an example would say, Hey, I’ve got this fixed inflow opportunity. Hey, Mr. Trustee, Mr. Capital Gains Tax Solutions. What do you think? I’m gonna say, great, Derek, what do you have going here? This is the deal. This is the, what we’re gonna pay for. Basically, this is the mini business plan, right? Derek, think that looks pretty good to me. That fits your risk tolerance of what you said you’re willing to do. And this is kind of what we’ve talked about in our business or investment thesis. We basically set this up prior to closing what and how the funds, where and how the funds are going to be invested. But if new opportunities come up, it’s a presenting. So it’s not a demand investment. It’s a percentt. And here’s the reality. What are the odds I’m going to say no to Derek, especially on a fix and flip that he knows how to do? That’s the best thing I want him to do. He’s going to make, he’s going no one’s going to care more and be more, more focused on it than Derek, right? Now we have to keep some liquidity. We like to say about 20%. We like to keep liquid. So if it’s a $10 million exit, Derek, you know, about 2 million, a good rule of thumb, and that can be in like a 30 day lending fund liquidity. We have one of those that’s paying 10%. Right. It could be the S &P 500. It could be in a money market account, right? It could be, it could be even in like a Bitcoin ETF or something, right? Something that you want to be in that you feel good about. can, we can do that. A good rule of thumb is that eight million can go with you into 80 % can go into another, another opportunity that’s illiquid. going to take some time. So that’s, I’m a friendly trustee. want to do deals, but there needs to be a separation between what’s called unilateral control, which by definition is ownership. versus a creditor, right? Which still has rights and protections as a bank, right? Just like if you have a home loan and if you don’t get fire insurance, guess what? The bank’s gonna come and take the house because you’re putting it at risk, right? They’re putting at risk. So that is the concept here.
Yeah. So my clients, my clients, once they understand that, I’m an advocate to help them find and do deals, not someone to stop deals, right? But we have to stay within the guardrails. Those are, those are the confines. Um, does that make sense on the controls? Any questions there? No, that makes perfect sense. Um, what, what would happen? Um, and I don’t know the size of your operation or how many people there are, but at some point, cause there’s not a lot of, of companies doing what you do. It’s not, which is great. Like that’s a, that’s a really good thing for you. But what happens if something happens to you or your firm, right? It’s not like we just start Googling the next, um, trustee that knows what the hell they’re doing with us.
Yeah, so a couple things. are a couple competitors out there. then also the tax attorneys would have a trustee in line. And I have a succession plan if something happens to me, my brother, our COO, would be the next in line if something happens. It’s a hit by the bus scenario, we both die in the plane crash, right? There’s always going to be a trustee to be in line. Also, outside of that, these are single entity trusts. They’re never co-mingled. Like, by the way, and it’s in 31 exchange, typically all the money’s in one big pot of all the other people, right? And there’s been lots of disasters with that. scenario, we were never co-mingled in any other trust account. So the safety of the deals is really important. And we were talking a little bit earlier about each separate trust. So how does that work to make sure that, you know, money is never co-mingled?
Yeah, money’s never commingled. Again, like a 1031 exchange, it’s typically all the funds are in one big exchange accommodator. And there’s been horror stories about that. with these individual trusts, they never commingled funds are typically trial swab, and then invested in real estate investments or business ventures, or even again, the joint venture partner with the note holder to do a transaction or buy a deal or something like that. And so it’s diversified. You have 24 seven access to view the funds online with your signature or your approval. So that’s important to understand on those controls. We also have a third party tax preparer that does the tax return for these are like C-corp returns for these trusts, full profit and loss, and that gives extra transparency and accountability. And oftentimes we’re also using financial advisors for those that want to have a financial advisor. We have those that are strategic alliances, some of the best in the country that can manage the capital or you might wanna bring in your own and we can talk to them about that. There’s a lot of, guess, separate parties that provide accountability and transparency. And I get in there like third party custodians like Charles Schwab, the biggest in the world, right, and what they do. So that gives people a lot of peace of mind when it comes to controls and transparency and accountability.
Well, as I said, I had heard about this before. I never explored it heavily, but I some other friends that have dabbled in it a little bit. I love anything that is, um, not mainstream, but a great tool. mean, just a fantastic tool. And the part that I really like about this the most is you’re not under duress with timelines. You can take as much time as you want. Correct me if I’m wrong, but you can take as much time as it needs to plan this out to where when you pull the trigger, you’ve got all your alternative investment, at least strategies or ideas in mind. And that’s key. I really think that’s the key. That’s key. mean, yeah, time horizon is the single most important foundation to investment, right? Not only your time horizon that you need in order to have a good return on your money, right? How much time you take, also… The time it takes to find and make great decisions like dollar cost averaging, or just buying when real estate goes down. We knew a couple of years ago that we’re probably at the peak. Most people saw that. Now, most didn’t predict interest rates would go where they’re at. But at the same time, if you sold, and what we did is we helped people get out, and then we went into debt investments where it was great, because debt is way up. Debt interest rates are way up right now. We’re making some great deals with people that need access to capital, and so the trust can lend.
we’re getting double digit returns, some as high as 16%. It’s pretty phenomenal, right? Versus a lot of these ROEs and that’s another thing you could, what can you do to feel like if this could be a good, or seed field understand that this is a good fit for you. We’ll do a ROE analysis. What’s your return on equity, right? What’s the value of the asset that you could sell today minus the closing cost, right? What’s the current cash on cash return, know, of any debt payments, right? And put a little amortization into there of what it might appreciate to over the next year or so. But a lot of things are maxed out. A lot of rents are kind of flat, right? And so it’s a good time to harvest those gains, but don’t overpay in a 1031. Rather use our strategy or consider it. And then let’s go into debt deals that are paying 10, 12, 15, 16%. And let’s get great cashflow coming in because most of our clients, part of the baby boomers, they’re part of the 84 to 100 trillion that’s transferring over the next 15 years. And there’s about 80 baby boomers in the US alone. And every single day, 10,000 are turning 65. A lot of them just really want cash flow. In fact, they feel you know, on paper and real estate and business, you know, rich, but they feel cashflow light, right? And they’re going, man, like all of this, like, do I just not harvest this and have, you know, and not redeploy it to get cashflow? And that’s what, boom, when you unlock that truly passive income number, where there’s no more time, it’s no more toilets, no more trash, no more tenants, no more, you team members that have to, you have to manage, you can truly harvest and then exchange it for increased cashflow.
Oh gosh, it’s a game changer. And also leave you guys with this one as well. Estate tax is something not to be taken for granted. That debt tax or estate tax is above and beyond the stepped up basis. It’s above and beyond, you know, basically if you’re, you know, 12, 14 million married or single, and then about, you know, 20, 26, 28 married, although those are set to cut in half and at the end of 2026. I’m gonna be aware of that.
Elimination of Estate (Death) Tax
We can also eliminate that death tax with our strategy. So this is for huge, huge exits and without any life insurance gifting or insurance required, but for what? So that you can pass on a family mission, vision, values, legacy, and you can be great stewards with the wealth, right? And that’s kind of really the concept here. It’s like, you’ve been a great steward and a great worker to build it, an investor and disciplined, well, spend some time planning, being intentional about what life looks like over the next one, three, five, 10 years with your wealth. And then let’s develop a plan that is going to unlock freedom and impact for you and your family. And that’s why we love it. We see the transformation for our clients and it’s just very rewarding to see the difference, night and day difference for folks.
Yeah, I’ve got so many other things that are already going through my head and just different opportunities. I say it on a lot of my shows. I love doing this, this podcast because I get to have conversations with people like you and I get my answers to my own questions and everybody else gets to listen in. So, uh, all of that being said, how do we get in touch with you? How do we stay with you? I will have a link for anybody listening to show, but, uh, I know you’ve got a book sitting there in front of you on your desk and for anybody that’s watching the video version of this. Um, yeah. Tell me a little bit about that and everybody can just go through the link, thegenerationsofwealth.com/gain and take it from there. Yeah, perfect. And that will take you to our website and our website will give you access to buy the book, to download the free ebook, to.. to schedule a one-on-one consultation with myself or one of my team members, here’s the key, you’d have a million dollar net proceeds, million dollar gain, right, to qualify for the application for the call. And this you have two assets at $500,000 that you can bind into one, that one will make that exception here. And then the other thing I would say is we also have a wealth, basically it’s a truly passive income auditor, right, where it’s gonna show these like, you know, 12 or so areas is a lot of stuff we talked about and it gives you an ability to rank it one to five of where you’re at with that. Like where are at with the family mission vision values? Where are you at with your return on equity understanding? Where are you out there with your capital gains tax, your exit planning and your state tax? And this is kind of like an audit. if you If you also send an email to info@capitalgainstaxsolutions.com and just type in the word audit, we’ll send that to you as well as another way just to take the next step. Because I think if you don’t get clear on these certain key key metrics and these clear numbers and these clear outcomes that you want, it’s difficult to see where I need to go from A to B. And so that would be another step that you can take. We have the YouTube channel, we have the podcast capital gains tax solutions, YouTube channel in the podcast. And then we have these amazing.
Deal stories from our clients, testimonials that you can hear by going to CapitalGainsTaxSolutions.com and they’re going to our YouTube channel and clicking on the success stories and you’ll be able to hear them straight on. Warren and Catherine shared their story. hear about Jeff Joaquin has sold a $17 million business in Sacramento, a billboard business and deferred his tax. He actually went a lot of it into a Nvidia. Nvidia has gone through the roof, right? You can hear from… Dave, who we saved his failed 1031 exchange, a $7.6 million multi-family property and deferred his tax. So you can hear all these stories. So those are the main things. And the very last thing I’ll leave with everybody is friends don’t let friends overpay in a 1031 exchange. We released the best 1031 exit plan. So although I’ve been talking about how challenging and how sometimes poor outcomes to 1031 can be, We don’t want to restrict any of our clients or investors from going for the 1031. In fact, if they can find the deal, we’ll give them a high five, but we do want to provide a backup plan. And so we released the best 1031 exit plan, which gives you the ability to do a regular 1031 and our backup plan in case it fails or sometimes it’s both. It’s a mixture of one and two. And so again, that’s called the best 1031 exit plan. All of that by going to the website that you mentioned, Drew, Derek, I’m sorry, and on your website. And then we will have it help. Perfect. Like I said, that’s the generationsofwealth.com/gain. We’ll have that linked over to Brett’s stuff and Brett, man, I really appreciate your time and just your knowledge. We’ve got a fairly similar amount of time in this industry. We’ve both seen a lot of changes over the years. And I always enjoy these conversations. So thank you very much for, for sharing. My pleasure, Derek. And thank you. Thank you for having me.
Of course. Of course. So until the, uh, the next episode, um, as always, please help us grow the generations of wealth message. Get out there and share this with anybody that you feel like should, um, should find us and hear about us. Give us all the All the likes and the shares and the love on all the social medias and until the next show, live your vision, love your life. See ya.
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About Brett Swarts
Brett Swarts is a best-selling author of “Building a Capital Gains Tax Exit Plan”. He is host of the Build it to Billions & Capital Gains Tax Solutions Podcasts. His insights have been featured at the Best Ever Real Estate Conference, DLP Capital Conference, American Entrepreneur with Kevin Harrington from Shark Tank, and also seen on Fox Business Network. As a real estate broker, his expertise is one of the few in the world who has closed Deferred Sales Trust, Delaware Statutory Trust, and 1031 Exchanges. He is the Founder of Capital Gains Tax Solutions where he teaches purpose-driven entrepreneurs and investors to build their capital gains tax exit plan to multiply their freedom, wealth, and impact. He has closed over ½ Billion in DST and Real Estate Transactions and he was the first to help Bitcoin owners exit millions of gains and defer their capital gains tax using a DST.