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How to Pay Zero Tax on Crypto (Legally) - YouTube
Channel: Max Maher
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It's possible to make $500,000
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a million dollars
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or even $10 million with crypto
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And pay ZERO capital gains tax.
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Do you believe me?
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Probably not.
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Should you believe me?
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Yes, because this is actually very doable,
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and it's really not that difficult.
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In fact, you can use the same exact method
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for stocks or for businesses,
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anything that you want to save capital gains tax on.
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So let's break this down step by step
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on how you can set up your assets
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in a very particular way
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to both save you money
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and benefit society while you're at it.
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Even if you don't have a lot of money right now
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you should probably watch this video
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for when you do have a lot of money
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and your future self will thank you
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for this ten minute investment.
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Also, for every new subscriber
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I get on this video,
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I will personally
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Donate $0.10
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To charity.
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And you'll see why later on in this video.
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If you're already subscribed, unfortunately,
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hitting unsubscribe and resubscribe
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won't do anything this time around.
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So let's go ahead and get into it.
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This plan works especially well
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if you've bought something that has dramatically
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increased in value, and if you decide
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to sell or diversify out of that thing,
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it means a huge tax bill.
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So let's say you invested $5,000 into Bitcoin years ago
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now it's worth $505,000,
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a gain of 500 grand.
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First off, Congratulations.
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That's quite the feat.
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But if you want to sell or diversify, you have a
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whole lot of taxes to pay.
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The good news is you've been holding
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longer than one year, so that means
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no short term capital gains.
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But bad news is you still have
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long term capital gains, and that can add up.
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If you were to sell that $505,000 in Bitcoin,
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you would pay a long term federal capital gains
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of around 20%.
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And of course, States need to get their cut of the action,
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and that can be anywhere between 0% and 13.3%,
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depending on your state.
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The average is 5% capital gains tax for States.
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So for this example, we're going to do
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25% total capital gains tax.
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At 25%, your $500,000 in profit
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would have $125,000 in taxes
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taken right off the top.
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And there is nothing you can do about it
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or can you?
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Yes, of course.
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That is why I'm making this video.
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One option is to move to Puerto Rico
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and become a member of act 60,
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wait ten years, and then you only pay 5% capital gains tax.
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But that might not be an option for you.
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And frankly, we have a better option.
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Also, it's very important to note that you
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only have options before you sell.
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If you've already sold, your options are
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basically gone.
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Double also, I am not a financial advisor.
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Consult all of this with a tax professional
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before doing anything crazy.
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Okay, so how do we save that $125,000 in tax?
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We're going to do this through a charitable
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remainder trust,
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aka, a legal way to save a boatload of tax,
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do good for society,
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and still leave money for your kids
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or your cat or whoever you want to leave money to.
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If that sounds good, you'll want to watch the rest of this video.
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You'll also want to grab one of the remaining 20 spots
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for my Patreon, where I have
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even more private money making content.
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Grab one of those before it sells out yet again.
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So, the most simple way
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to describe a charitable remainder trust
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is it's basically a fund that you set up that says,
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after I die, I want this money
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to go to a charity of my choosing.
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And you might be thinking, well,
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you know, charity is great and all, but I wanna
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actually use the money that I made
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in my investment.
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And to that I say, Hold your horses, we're not done yet.
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We haven't gotten to the best part yet.
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So let's backtrack a bit.
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We have $125,000
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in an expected tax bill if we sell.
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So first we reach out to a lawyer and we have them
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form a CRT for us.
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Then you need to choose a charity that you're going to
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donate your money to.
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That charity needs to be a 501(c)(3)
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legitimate charity.
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And then you set yourself as a lifetime beneficiary
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of the Charitable Remainder Trust.
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Now that it's set up, you're going to donate
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your $505,000 in crypto or stocks or other assets
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to your CRT.
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So your CRT is actually going to have its
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own crypto wallet that you send that crypto to.
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It's a completely separate entity from yourself.
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Now, what's interesting here
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is your CRT is actually
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a charitable entity in and of itself.
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So by transferring the funds,
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you get a tax deduction
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right away because you're
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putting it into a charitable entity
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for donating money to your own charitable trust.
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It's like it's your very own kind of like make a wish,
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except your wish is to pay less tax,
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and then you got your wish.
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So you get an instant tax deduction.
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However, it's important to note that you don't get
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a 100% deduction
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on your donation because you aren't
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actually donating it to a 501(c)(3)
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until you die,
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which is hopefully a long time from now.
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So there's this present value calculation
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that is done on your money.
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This is because money 40 years from now is worth
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less than money today.
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So instead of deducting 100%,
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you could deduct around 30% to 40%
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from your taxes.
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And of course, this can vary a little bit.
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If you were, for example, to donate to a
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private institution like a College or your
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very own charity, that percent deduction
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would be a little bit lower than 30 or 40%.
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But we'll assume for this example, that
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you're donating to a public eligible institution,
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and then we're gonna estimate on the low end with a
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30% deduction against your taxes.
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This means on our $500,000
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we just got a tax deduction of $150,000.
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Now you don't get that all on year one, though.
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How it works is you get to deduct
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60% of this balance against your income,
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every year for five years.
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So year one, you get to deduct $90,000
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Year two, $36,000
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Year three, $14,400
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Year four, $5,760
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then finally, Year five you deduct the remaining $3,840.
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Okay, so we get this nice little benefit
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on our income tax for the next five years.
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But it doesn't stop here.
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So far we've just transferred our Bitcoin
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to the Charitable Remainder Trust.
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There is a whole lot more goodness coming.
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So we haven't sold it yet.
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The next step is to sell it.
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Now, when you sell, you're selling capital gains tax free,
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because it's not actually you selling it.
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It's a charity selling it.
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And say it with me,
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Charities don't pay taxes.
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But we're not done yet.
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Here's how you really benefit.
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Now that you've sold, you have options.
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You can leave the trust as cash, which you
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probably don't want to do.
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Or you could buy other assets within the trust.
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You could buy real estate, you could buy a business,
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you could buy even more crypto.
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You can really buy any kind of asset.
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And then you set up an annuity.
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This can either be percent based
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or a flat amount every single year.
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This will be paid out to you
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from the charitable trust
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until you die.
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And if you go with the percent,
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it has to be at least 5%.
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For this example, we're just going to go with 7% paid annually.
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So now you get 7% paid
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of your $500,000 every single year,
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$35,000 every year until you die.
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Give or take a little bit depending on the portfolio's performance
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and a charity will benefit in the end.
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Now, it's important to point out
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that you do pay tax on the annuity payments
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every year at your regular income tax rate.
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But remember, you do have that nice little
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tax deduction for the first five years,
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thanks to your initial donation
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of $500,000.
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Now, a side benefit here is the money within this trust
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is totally protected from personal liability.
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I mean, you could go and crash your car
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into a preschool and be fine.
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I'm not saying you should.
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That's definitely not financial advice.
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You shouldn't do that.
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But if you did, your charitable trust cannot be touched.
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Now you might be thinking,
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you know this sounds great and all,
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the trust part,
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not the running into a pre-school,
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and crashing into pre-school part.
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But I wanna give my- [Laughs] sorry.
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But I wanna give my money to my kids when I die.
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Not necessarily everything to a charity.
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So this won't work for me,
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and you would be wrong.
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You can still do this as well.
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So in order to do this,
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you need to call up your lawyer and have them set up
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an irrevocable life insurance trust.
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This is a life insurance policy
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that you'll set on yourself
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for $500,000
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And how do you pay for it?
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With your annuity payments.
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You can pay this policy little by little over something like
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20 years if you want, or you can just
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overpay it for the first five years
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when you're getting those nice, juicy tax write offs,
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and then you can never pay it again,
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leaving that same $500,000
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to your loved ones after you die.
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This is when money gets fun.
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But of course, there are a lot of variations
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on how this can be set up.
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So consult with a tax professional.
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I called a few law offices to
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check out pricing for the sake of this video,
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and you're looking at between $3000 and $8,000
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to set this up depending on who you go through.
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And I also found that some charities
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will even help set this up for you
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if you plan on donating to them after you die.
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So there may be even cheaper options there.
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Now, let's briefly talk about some of the cons with this.
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First, you generally need quite a bit of assets
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for this to work.
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It seems to me like you need at least
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about $100,000 in gains for it to start making sense.
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Second, charitable trusts are
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unchangeable by design
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for tax reasons.
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So you can't easily decide later
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to remove assets or change the beneficiary.
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A lot of it is set in stone
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after you go ahead and sign the paperwork.
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And then third, you lose legal control
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of the assets inside the trust,
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even though you still benefit from it.
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That's why if you crash into a preschool, you're fine,
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because it's not you, it's a separate entity.
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- Remain calm. I have trained for this.
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So in summary, you made $500,000.
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You paid no capital gains tax.
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You get a nice tax write off.
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You get paid for life.
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You get a benefit of charity
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and your family is still taken care of.
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So remember to subscribe and I'll donate to a charity.
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Join my Patreon link below if you're looking for
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even more additional content.
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And as always, have a profitable day.
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