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How the UBER-rich uses TRUSTS to hide wealth - YouTube
Channel: UpDive
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what's up guys in this video you'll be
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learning about trust the favorite
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vehicle of the mega ridge to put the
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money in and to pay less tax and we also
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got to bring south dakota in the picture
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this place west of minnesota the fifth
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smallest popular state in america with
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less than one million people is the new
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switzerland literally why do the rich
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need another place to hide their money
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later on in the video i'll share with
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you the four features of the south
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dakota trust that make the rich really
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love this state so much
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so a trust is simply a legal arrangement
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that does three things to provide
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ownership management and distribution of
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some trust and it's easiest to think
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about a trust like a box and this box is
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used to place assets in it and you could
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place many types of assets in this box
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it could be a car property painting
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antiques even a like and subscribe
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button so around this box there's
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actually three important roles then you
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understand how our trust actually works
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so let's create an example and start
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with grandma so grandma has saved up
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some wealth and now is planning to
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distribute it to those in her family so
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grandma here is the trust grantor the
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person who creates this trust and place
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the assets in this box then let's say
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there's a person called mr trustworthy
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he's known as the trustee because he or
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his company actually oversee and manage
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this box according to what grandma wants
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lastly there's mr lucky he's the
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beneficiary who will actually receive
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the benefits from the assets in this box
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and that's it really for the players in
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a trust but why does grandma here need a
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trust in the first place so if she wants
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just to distribute her wealth when she
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dies she does have other choices she
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actually could leave it to grandpa trust
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him to distribute the assets according
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to her wishes but it's obviously
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uncertain how long grandpa will actually
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live the second way is grandma could
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also ask a younger and trusted friend to
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distribute the assets for her but
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there's still little guarantee that
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after grandma dies does this trusted
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friend actually execute the plan
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according to grandma wants so in order
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for grandma to get that execution
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certainty she could set up a trust and
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have it executed as she wishes without
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any surprises the other big benefit that
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the rich love about trust other than the
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certainty is that there's a lot of
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protection on the assets which shields
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it from creditors bankers governments
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and even unwanted family members so
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let's talk about the creditors first so
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if you borrowed money before maybe from
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a bank to buy a car or house you know
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that if you don't pay up the bank
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actually sees your car your house so
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they can settle off to try to get their
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money back but if their assets are in a
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trust it gets a bit more complicated for
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the bank because the ownership of the
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assets of the car or the property is
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actually now in limbo because the
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grantor like grandma can argue that they
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don't own the asset anymore and the
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trustee the trust itself can argue well
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they also don't own anything they just
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manage the asset according to a specific
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contract and then there's a beneficiary
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they can also say they also don't
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anything yet at least not now and they
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haven't received anything from it so
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they also don't own the asset either and
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that's why the rich and wealthy really
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like using these trusts because they
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make the ownership really fuzzy while
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still keeping control on these assets
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now trusts also come in all shapes and
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sizes but without going into detail into
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all of them let's talk about some of the
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main categories by introducing two types
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of forks to get to know different trusts
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the first fork for trust is whether it
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is revocable or irrevocable
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or you obviously don't hear that word
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every day and irrevocable trusts cannot
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be modified amended or terminated
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without the permission of the grantor's
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beneficiary basically it's very hard to
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change the instructions for the trustee
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and this provides the trust a lot of
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protection at the cost of flexibility
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and on the other hand revocable trust is
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quite the opposite and you can actually
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guess what it means this type of trust
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actually allows the grantor so it's
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grandma to make changes to the trust
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terms after the trust has been set up so
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there is flexibility but also less
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creditor protection other fork that
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differentiates trust is about time so
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whether the trust has a fixed life like
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whether they will self-terminate after
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some form of event like distributing or
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trust when certain conditions are met or
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if the trusts are perpetual they are
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never ending like dynasty trust so
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dynasty trusts never die they exist in
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perpetuity and dynasty trust which is
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what south dakota allows and i'll get to
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that in a sec is really controversial
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and for me right now my current opinion
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on this type of trust is just it's
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really wrong ultra selfish to set up and
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it doesn't benefit society and i'll give
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you an example and you know what i mean
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so let's say one million dollars was
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placed into a dynasty trust and this
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trust had the ability to get a six
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percent after tax return every year and
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let's forward 100 years so after 100
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years this 1 million dollars will now
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become
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369 million dollars and let's forward
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100 years again this money now becomes
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136 billion dollars which is as rich as
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bill gates and another 100 years or 300
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years in total this now becomes 50
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trillion dollars now that's richer and
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bigger than the whole gdp of america and
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that's all it takes to be bigger than
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america's gdp one million dollars 300
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years growing at six percent that money
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is so big it's not taxed and it's
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usually just within one family now do
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you understand why i think it's so wrong
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so the numbers i just talked to you
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about isn't a crazy scenario or
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impossible scenario even because tiny
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trusts are allowed the money is shielded
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secretive and untaxed and the investment
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return i'm talking about isn't all that
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crazy and it's south dakota that's
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making this possible before i go into
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specific we all should understand what
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is that big loophole of the financial
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system known as fat car and crs so i'll
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talk about crs first and it stands for
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common reporting standards it sounds
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quite boring but it has good intentions
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just to make taxation reporting more
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transparent between countries
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governments and tax authorities began to
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exchange information with each other so
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it made it harder for the rich to
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actually hide their wealth overseas that
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is except in the united states and this
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is kind of the first step of taking that
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pedestal away from switzerland so
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america did not join the crs system and
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they preferred to go on their own way by
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relying on a congress-enacted law called
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fatca which stands for the foreign
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account tax compliance act though to be
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fair no fat card started actually before
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the crs in 2010 but here's the big
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loophole because what we have here right
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now was a crs system where governments
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around the world were exchanging
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financial information but america wasn't
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part of crs system which means
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foreigners could put their assets in
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america and there was no obligation for
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the american government to tell anyone
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else and that where in america is south
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dakota so here's the four favorite trust
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features that the rich really love
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unparalleled tax efficiency south dakota
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has no state income capital gains
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dividend interest or intangible tax so
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trusts set up in south dakota that earn
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money in their investments are literally
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given a free pass 24 7 365 days a year
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and to rub it even more south dakota
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also has no state inheritance or state
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tax which would kick in when
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beneficiaries actually receive the asset
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from the trust that's not taxed as well
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because assets held in south dakota are
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only taxed under south dakota law what i
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just said meant there's no tax at the
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end point when the beneficiaries get the
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assets and it's almost no tax while the
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trust is an operation well that kind of
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makes me want to move to south dakota
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now for tax reasons but i'm still not
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sure what i'm going to do there and i
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don't have that kind of money the second
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feature is no south dakota residency
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requirement for the beneficiary because
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the requirements actually only the
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trustee or the beneficiary needs to be
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in south dakota but the trustee is there
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in south dakota
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so this might not sound that awesome of
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a benefit to you but think about the
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hundreds and thousands of family members
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of the mega rich who live outside of
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america they don't even need to live and
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work in south dakota to be the
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beneficiary of these trusts yet they can
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have their money parked for them in
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south dakota until they need it so you
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can live in the middle of america and
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have your money in a south dakota trust
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you can also live in the middle east and
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have your money also in a self to go to
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trust without the residency requirement
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for the beneficiaries it's just super
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convenient and almost a no-brainer to
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set up this trust in south dakota the
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third feature is superior secrecy now
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south dakota is like a heaven for the
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mega ridge not because of the enjoyment
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of luxury but because it helps them keep
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their money super secret and this is
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done in two ways first of all the court
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actions in south dakota relating to
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these trusts can be sealed forever so no
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information actually gets leaked out to
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the public now secondly the
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beneficiaries themselves of the trust
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they also don't need to be notified that
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they are beneficiaries because the
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grantor has the option to delay
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notification until the day they actually
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die so that means there's also not going
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to be any public notice this way so you
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have a situation where the mega ridge
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could set up a trust in south dakota for
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someone outside of south dakota and once
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everything is set up no one else is
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going to know an actual thing not a
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creditor not your family
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not even other governments everything is
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set up to be super secret and the last
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feature is there's no termination date
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on the trust at all so trust created in
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south dakota can last as long as short
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as you actually want and i said earlier
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in the video perpetual trusts are quite
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controversial and in my opinion they're
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actually quite bad because usually trust
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lasts a maximum between 80 to 100 years
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so usually it shuts down after one to
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two lifetimes and for a state like
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florida is actually 360 years but south
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dakota actually upped the ante here and
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made it forever so for the mega rich
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there's really no better place to park
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the money in the trust than south dakota
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so in just 10 years south dakota trust
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companies held 57 billion dollars in
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assets 10 years later this has risen to
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360 billion dollars and i don't think
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this trend is actually going to stop
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soon because the rules are so favorable
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so i'm not sure how well you know the
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rich and what they eat how they dress
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what they do but after this video you'll
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probably be super clear on where they
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keep their money and why
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