079 | Protect Your Legacy from Taxes, Lawsuits, and Family Feuds with Antony Joffe

Patrick: [00:00:00] It is easy to feel stuck when it comes to estate planning, like your one wrong decision away from messing everything up, or worse, leaving your family with a mess to clean up. Welcome back to another episode of the Vital Wealth Strategies Podcast. I’m your host, Patrick Lonergan, and today we’re diving into one of the most important and most overlooked wealth strategies out there trusts, and I’ve got the perfect guest to walk us through it.
Joining me is Antony Joffe, chairman of Sterling Trustees, one of the top independent corporate trustees in the country. Based outta South Dakota, widely considered the best jurisdiction for trust planning. Anthony’s been in the trust world for nearly two decades, and in this episode he shares what families are doing to protect their wealth.
Reduce taxes, avoid unnecessary drama and pass their legacy down with clarity and confidence. We get into why so many successful entrepreneurs delay estate planning. What makes South Dakota such a powerful legal base for trust? How to avoid costly [00:01:00] trusty mistakes and why a properly structured trust isn’t just for your heirs.
It’s a game changing business strategy. If you wanna keep more of what you built, shield your assets from lawsuits and estate taxes, as well as create a structure that supports your family’s values for generations. This is the episode to stick around for, and if you’re ready to take action on what you learned here, we’ve got more tools and resources waiting for you over@vitalstrategies.com.
Slash tax. Check it out. Alright, now let’s jump in. I’m excited about this conversation today. We’ve got an Anthony Joffe, who’s the chairman of Sterling Trustees, who’s an independent corporate trustee chartered out of Sioux Falls, South Dakota. Uh, and they work with high net worth and ultra high net worth families from from around the world.
So, an Anthony, thank you very much for, for joining us here today.
Antony: Thanks for having me on.
Patrick: Yeah, I’m, I’m excited about this ’cause I, I think. The conversation about trust and estate planning is, uh, uh, it must be scary to, [00:02:00] uh, people out there because it’s, it’s shocking the number of, uh, clients and people that we come across that have net worths approaching nine digits and they’re, they still haven’t done anything with their estate planning yet, and, uh, I think they’re concerned about.
Making mistakes. You know, I don’t, I don’t wanna screw this up. It can also feel overwhelming, you know, uh, everything from, I’ve gotta make all of these decisions. I don’t know what to do. So they default to, uh, to nothing. And then I think there’s also maybe a, a philosophical problem around, you know, geez, I’m gonna create this thing.
I may not be able to change it. How do I put the right people in place? So, you know, the financial industry doesn’t just sort of bleed my, my assets dry and uh, unfair fees and that type of thing. So. Um, I’m excited about getting into to all of that. If it’s okay. Can you give us a little bit of your, your background and how you, you, you ended up at Sterling?
Antony: Yeah, sure. Um, so I’ve been in the trust industry for I guess, 17 plus years. [00:03:00] Um, really got in, uh, my, my dad and I started the business. He was a practicing trust and estate’s attorney and he and I did to start a, uh, South Dakota Charter Trust company. ’cause he had a number of clients that were, uh. Where he was the independent trustee and wanted to make sure that they were taken care of long term and had the idea, you know, my background, I’m a CPA by training.
Uh, worked at one of the big six for two years and then spent about 17 years in investment banking. And I guess my dad called me at the end of, was seven. It seemed like a good time to get out of the investment banking world until a more recurring revenue business. And I joined him and here we are 17 years later.
Uh, we haven’t, we haven’t killed each other yet, but, uh, it’s, it’s, you know, the business has been. It’s a very interesting business. You meet a lot of interesting people and try to solve a lot of interesting problems. And you know, I tell people that I’m, I’m a high price psychiatrist.
Patrick: Yeah. I, I love it. And, uh, the thing that I love about trust in general is they are so flexible in so many different ways.
But I think some of those, those [00:04:00] flexibility and, uh, decision points can cause people some, some issues with really getting started and figuring out, uh, where to go. So, uh, this is all great. I I love your, your expertise. You, you touched on South Dakota for a second. Uh, I think South Dakota is, uh, sort of establishing itself as the, the place to, um, really create trust.
And I think that’s for, for a number of reasons. But can you give us the highlights as to why South Dakota is the. The place to really consider when we’re, we’re, we’re sure starting our trust.
Antony: Yeah. I mean really from a trust law perspective, I mean really sort of the big advantages are there’s no state income tax capital gains taxed.
Uh, no rule against perpetuities, which means you can have a trust that goes on forever. So for wealthy families that, you know, they’ve accumulated wealth, this will last them for multiple, multiple generations and potentially eliminate GST tax, which is generation skipping tax. Um, they’ve got the, the director trust statutes, which allows you to sort of.
Trifurcate the role of the trustee and give families a [00:05:00] little more control over their trust, uh, long term by appointing a distribution advisor and an investment advisor. Uh, great asset protection. Uh, so once assets are in trust for two years, they really become bulletproof accreditors and for, again, for wealthy families or for families that, uh, maybe are working in high risk industries, a real estate or a doctor, um, you know, being able to protect your assets in case.
Forbid one day something goes off the rails, uh, you know, those assets would be protected. Great privacy. Uh, you know, the one there for our clients is, you know, most states at the age of 18, um, you need to notify the beneficiary of the existence of a trust, and they’re entitled to get a copy of the, the, uh, the trust and and statements.
So you can imagine, you know, 8-year-old kid going off to college finds out they’re the, uh. Beneficiary of a five, 10, a hundred million dollars trust’s, sort of a great way to stifle their ambition. And, uh, South Dakota silent is to that. So, uh, for our high net worth, ultra high worth families, that’s really a, [00:06:00] a huge, huge benefit.
So those are, what are the big ones that are out there? Um, and that just give your audience sort of a quick, uh, on size of the industry. I mean, South Dakota today has more bank of trust assets than the other state in the country by a factor of two. So it actually. For Delaware, there’s over, uh, 60 public trust companies in South Dakota and an additional, I think 60 private trust companies.
So it’s become a, you know, a huge industry and with its progressive trust law, it just continues to grow and grow.
Patrick: Yeah. Yeah. I, I love this and I, I think all of those things you stated are, are fantastic. And, and one thing that we’re starting to see too is. Some of the, the incomplete non grantor trusts, uh, the, the concept of I can, I can be living in a high tax state, high income tax state like California, New York, that type of thing.
Um, I can create my trust in South Dakota and, uh, let’s, let’s say I’ve got a hundred million dollars of investment assets that are kicking off really nice income. Uh, and I’m [00:07:00] tired of giving, you know, a pretty, pretty good percentage of that to the state. Um. In the form of tax. So I could, I can cite us that, uh, trust in South Dakota and now I’ve eliminated my, my state income tax liability on that, that a hundred million dollars and the, uh, the capital gains and the dividends that it’s kicking off, how, how aggressively are some of those states?
Are they trying to come after that, uh, that, that income or, uh, is that pretty well buttoned up with? Case law that there’s, there’s not much, uh, they can do when, when those assets leave.
Antony: Case law is, is, is pretty solid, but I would say probably the most aggressive state out there right now is California. I mean, they really might have their hooks into everything.
I mean, if there is a co-trustee serving in, in, uh, California, or even a protector, um, you know, it, it kicks the trust into the California tax system. So all the benefits you’ve tried to reap, uh, aren’t aren’t out there so. The key is really getting it structured correctly to get everything [00:08:00] out of California and, and whatnot to really protect that income from, from the California state, uh, income tax.
Patrick: Yeah, i, I, I love this, Anthony, you talked about co-trustees and, and some of those other things. So, uh, that, that sort of leads us into this discussion about, uh, a trustee in general. Can you give us an overview of why Sterling Trustee versus a, a family member or a local bank or something along those lines?
Antony: Sure. Uh, so, you know, if you were to compare us stealing trustees as an independent corporate trustee versus a individual trustee, you know, I think the big thing is a lot of family members are honored to be chosen to be the trustee. And you know, what they don’t realize is the, the fiduciary risk and legal risk that they’re taking on, uh, in order to serve in that role.
So you need to have. Legal knowledge, tax knowledge, investment knowledge, accounting knowledge. And uh, you know, most of these people don’t have it. And, you know, that’s where mistakes happen and you get into, uh, get into some huge issues. The other issues that you see is just, it creates family stripe because sometimes [00:09:00] old name, oldest son is the trustee and now younger brother, younger sister have to go to older brother to get a distribution.
And you can imagine, you know, the potential issues that that can cause. Know, when you compare us to sort of a bank trust company? You know, I think the, the two biggest things really are what I call a, there’s a conflict of interest between the trustee and the investment advisor. Um, and the way I sort of say it is, you know, if you’re at a, a bank trust company, they’re acting as your trustee, your custodian, and uh, investment advisor.
And if the investment advisor part of the house is not doing a good job, unlikely the trustee side of the house is gonna fire them and move the assets somewhere else. That’s what we do. We work with best of breed financial advisors around the country to do that. The second big issue that you see with the big bank trust companies are what I call distribution bias.
Where client wants a distribution, they call up and the bank makes you stand on your head to get the money out because if they distribute the money out, it lowers their assets on the management, which lowers their fees. So that’s the other thing that [00:10:00] just drives clients crazy. And so, you know, we eliminate that by just charging a fixed fee.
So we have no sort of ax to grind in terms of. Distributions.
Patrick: Yeah, I, I love that. And, and I wanna just talk about the fixed fee for just a second because I, I, I look at the industry in general, and, and when I say the industry, I’m gonna call it financial services industry, and we can, we can lump, uh, you know, uh, trustees that have that conflict of interest with managing the assets and also being the trustee into that, that equation.
And. There’s so many conflicts, uh, that are out there. The the biggest one that we see is clearly commissions, right? Like it’s, it’s really hard to know if this product is best for me when there’s a commission involved, because my advice is now skewed by my, my compensation, uh, to a lesser extent. Even though when we have, uh, we’ll call it, uh, assets under management, uh, I’m supposed to be taking a fiduciary responsibility, uh, if I’m managing those assets, uh, for a fee.
There’s still conflicts there. [00:11:00] Right. You know, I can skew my advice to, uh, you know, keeping those assets in the portfolio versus doing things like paying down debt and that type of thing. And so it’s like, well, yeah, I’m gonna give you the advice. It sounds really good, uh, but it’s all gonna point to leaving the assets.
Um, there, I love the fact that you are removing all of that and you’re saying, Hey, we’re, we’re charging a flat fixed fee. Uh, we’re independent of. If we don’t care who’s managing the money, we just want the best performance for you. And we’re gonna start pulling the levers in a way that, uh, are gonna comply with, uh, the documents that were created, the wishes of the, um, the grantors, and, and make sure that everything is, is going well.
We do things very similarly. We think a flat fee makes sense. Um, and so. Those are, um, I think just really important highlights that most people will gloss over and then all of a sudden their administration’s not going the way they want. And they’re like, what’s happening here? It’s like, well, oh, I see your financial [00:12:00] incentives or, uh, uh, misaligned with what we wanna have done.
So I think that’s, uh, that’s great. Um, good. Anything else on, um. Because I, I’d say
Antony: two things on the fees. One is, listen, at the end of the day, I’m really providing fixed administrative service. I’m not making the assets go up and down. Hopefully we’re working with good investment advisors that are doing that.
So, you know, I don’t think I deserve to be paid on a a UM basis if I’m just providing an administrative service. Um, and listen, the same thing goes sort of in your industry if, uh. You’re managing $5 million versus $10 million. I mean, are you doing anything more to do that than, you know, two different amounts?
Probably not. Maybe you’ve taken on a little more risk just because of the size that one could go wrong. So I sort of agree there and you know, I think that, you know, the benefit of having us is we’re gonna look over the shoulders of the investment advisor. And if they are putting the client into, um, products that have high fees, you know, let’s just say it’s a large clap.
Large cap ETF that’s charging [00:13:00] 20 basis points when you can get the same one for five basis points. You know, we’re gonna call them out on that look after the client. I mean, that’s what we’re getting paid to do.
Patrick: Yeah, absolutely. And, and you, you also touched on a key point around family being involved as a trustee.
We’ve seen family, uh, suing each other when they weren’t necessarily trustee. They, they were inheriting. Business assets and it’s just a mess. And so we’ve seen a quarter million dollars spent on legal fees suing one another in, in a family. And it’s like, okay, this is, this is not, this is not what anybody wanted outta this scenario.
And so keeping family outta the mix, I think is a very wise move, especially when assets are, the only time I’ve seen it work out when there was about. You know, a thousand dollars left and they have a pizza party every year. You know, that’s, that’s all there is. Like, there’s, there’s not a lot of money to administer like that.
That works well worth, uh, that works. But other than that, it, uh, um. I think once the dollar start getting real people’s interest, uh, [00:14:00] starts, uh, conflicting. So, and, and you also touched on the liability, right? Um, can you talk a little bit about, uh, how important it is to have bonded trustees and sort of, uh, everybody on the, the team being bonded?
Yeah,
Antony: absolutely. I mean, listen, that’s, uh. The number one risk in our, in our business is, you know, making an error or admission or whatever it is. And we’re insured through the wazoo between director’s, insurance, uh, errors and emissions, uh, cybersecurity, insurance, all that kind of stuff that, you know, an individual that’s serving typically doesn’t have.
And so, you know, when they make an error, you know, they might have to, they’ll end up going into their bank account to make a, a beneficiary hole if they make a bad decision where, you know, we’re protected and, uh. We have the, the systems and whatnot in place to be able to manage the fiduciary risk and the, the regulatory risk where again, individual really doesn’t, doesn’t have any of that, and, uh, just don’t, doesn’t have the knowledge or the skills.
Yep, yep. This is, uh, this is
Patrick: great and I, I think [00:15:00] one thing I’m curious about is, let’s say somebody’s got a trust, it’s set up and they’ve got a trustee and they’ve got some of the problems we’ve been talking about. They’re. Uncle’s managing it or there’s a bank. Uh, how do we go about, like, if, if we say, this all sounds great, how do we, how do we go about transferring that to Sterling?
Is there Sure. A process to do that?
Antony: Yeah, so it sort of happens one of two ways. Um, generally if the trust has been drafted, well, there’ll be, uh, language within the trust document to be able to change trustees and change the ciis of the trust. The ciis is the jurisdiction that governs the trust law. So, you know, in our case, South Dakota, so.
If the trust has been drafted, well, there’ll be language in there to, to make those changes. So it should be, you know, relatively straightforward. You know, you just need to follow the language within the device document to make that, make that happen if you don’t have that capability. The other thing you can do is what’s called a decanting, where basically you set up a mirror of the existing trust.
Let’s say that trust is in [00:16:00] New York or California. Mm-hmm. You can set up the exact same trust in. In South Dakota change the, so it changes the governing law and the trustees, and then you pour the assets over from the existing trust into this new trust and, and off you go. You know, uh, unfortunately you’re gonna have some legal expenses in doing that.
But on the plus side, take California for example, you’re not gonna pay any state income tax, so capital gains tax on any sales or capital gains in the trust. So, you know, the payback on this is, you know, really quick. Mm-hmm.
Patrick: Brian? Absolutely. I, I think that’s great. And I, I also think. Just in his encouragement to our, our listeners, all the, the legal teams we work with, uh, are really good at, um, building these trust and building in some flexibility.
Just knowing that, you know, the estate tax law has changed, uh, you might wanna make adjustments over time. And so, uh, we think that’s a, a key piece to, to the designing a trust. We joke a little bit about people’s estate plans. They usually have three. There’s the one they want, the one they think they have, and the one they actually have.
And we try [00:17:00] to keep those, um, updated and, and make sure almost every five years or a life event is, is kind of a good, uh, review schedule to make sure that, um, everything’s, everything’s staying on track. So. All right. Um, Anthony, this has been great so far. So let’s, let’s say I’m thinking about putting together a trust.
I’m at the point in my. My life and my business and my career that I’m going. Okay. Uh, we’ve accumulated some significant assets. I love all the benefits that, uh, South Dakota offers. What, what, what would be a good first step, um, to, to get that, that process going?
Antony: Yeah. Listen, we’re, we’re happy to field those calls and, you know, give the clients guidance as to what to do.
We can refer them to attorneys that, you know, work in South Dakota, or No, South Dakota Law and License in South Dakota law so that they can draft the trust. Or, you know, the other step is, you know, if the client has an existing relationship with a trust and estate attorney, you know, tell ’em, listen, I want to create a South Dakota Trust, uh, as part of my estate.
And, uh, you know, [00:18:00] if the trust and estate attorney’s, you know, worth their waiting goal, they’ll help them and agree with them to, to make that happen. If they’re, if that attorney’s not licensed in South Dakota, um, you know, there’s a whole cadre of attorneys in South Dakota that all they do is help out-of-state attorneys move trusts.
Into South Dakota, they charge maybe a thousand bucks to do it. They’ll just basically review the, the work that the existing trusted estate attorney has done to make sure it conforms and, you know, off you go. So it really just depends on, on, on the relationship. But you know, we’re here to provide clients, uh, with that advice and get ’em going in the right direction of if they’d like to speak to us.
Patrick: Yeah, yeah. No, I think that’s, that’s great. And, and I love the fact that when we think about all the decisions that maybe need to come through. The process of building our trust. I think starting with Sterling and having sort of that check box crossed off for trustee, like, okay, I don’t have to think about that.
Um, you know, is, uh, is fantastic. So, uh, and, and I also wanna encourage our [00:19:00] listeners too. Um, so my, my dad was a small town attorney. Uh, definitely did some estate planning, but also did lots of other, uh, planning, you know, uh, would do. Everything from set up, some, some legal entities to, you know, there might be some divorce, uh, real estate closings.
Did a little bit of everything. From our point of view, we like working with attorneys that are really good at estate planning. Uh, it’s all they do. They’re not dabbling in these other things. If they, uh, if they firm does those other things. It’s handled by different advisors, uh, because we, we think the, um, the complexity that comes with.
Building trust and the, all the different types of trust out there. Uh, somebody needs to be on that and they need to be doing it regularly. And, uh, our preference would be, uh, and this happens regularly to our clients, their, their legal counsel, uh, that they’ve used for some of their, you know, uh. Entity documents and that type of thing is, is really good at that.
Uh, and they [00:20:00] can probably do some estate planning, but they’re not used to doing the level of estate planning that our clients need. They might be the wealthiest client they deal with. And, uh, we would like to just make sure, uh, like, uh, Anthony, you touched on this, uh. Call Sterling and you will put them in touch with somebody that’s really good.
You don’t have any financial incentive to nope. Uh, steer them any other direction than, uh, get them great outcomes. And so I, I think that’s great. We do the same thing for our clients. We have no financial incentive to, uh, refer you to one attorney versus another. We just want the best outcomes. And we, uh, the nice thing about the work we’re we’re doing, we think, you know, I’m in Iowa, uh, south Dakota’s a neighbor.
Uh, we’ve got some firms that are right on the Iowa. South Dakota border, that, that do great work. And I think from, from my point of view, the Midwest pricing is really good. You know, you get out in California and New York and even we’ve seen some, uh, you know, Dallas, uh, Texas attorneys that they get expensive.
Uh, and [00:21:00] so it’s nice that we can, uh, get some of this, this work done for, for lower costs. So, uh, that’s just my, I’d say general disclaimer for. Just find super qualified counsel and you might pay a little more, uh, to get the work done, but it’s, it’s gonna be done well. And, uh, um, an ounce of prevention’s worth a pound, a cure.
So I think the, be
Antony: of our models, listen, we’re, we’re focused on being a trustee. That’s what we know how to do. Just like you are focused on the planning and investment side, you know, work with a trust and estate attorney that’s just focused on that. ’cause I mean, you know, you go to a smaller town lawyer that maybe dabbles in a whole bunch of different things.
I mean. Today, unfortunately, in the legal practice, I mean, a lot of these documents are just computer driven. They’re filling in names, addresses, phone numbers, and you know, they’re off to the next, next trust. And, you know, unfortunately, you as the client who doesn’t really understand some of this, uh, stuff, doesn’t know any better and long term, that’s where you, you know, potentially could get caught in a bad situation.
Patrick: Absolutely. And it, [00:22:00] it’s shocking. Uh, we’re reviewing, uh, trust and estate documents regularly. And just today we had a meeting with a client and, uh, we’ve got, one of our advisors, uh, on our team is a, is a, an attorney. He’s not a practicing attorney, but he’s, he’s got his legal background and, um, he was reviewing their documents and they’re so long you don’t, you don’t typically, the clients typically don’t read them.
Uh, but there was, there was. A surprising number of errors in, in the documents. They were very administrative, but you can tell that this is, uh, done as a form and they’re just, uh, for lack of a better term, you know, search and replacing some of these, these things. And so, uh, yeah, having a separate second set of eyes, you know, take a look at these things and qualified counsel that really knows what they’re doing is, uh, is really important.
So, um, I love that. Okay, so let’s see. Somebody calls Sterling, you get ’em pointed in the right direction. Uh, they, they start to get their, their trust documents, [00:23:00] uh, put together. Can you talk us through what it looks like to have a, a relationship with Sterling and, uh, just the, the value you’re providing on a, on a regular basis for, uh, administering the trust?
Antony: So, you know, once the trust document is sort of complete, signed, ready to go, um, you know, we will onboard the family. Basically, we need the trust document. We’re gonna need all the KYC information as to the source of wealth and where all this came from and whatnot. I mean, sort of just basic stuff that you know, you as an investment advisor do as well.
You know, once we have all that information on board, typically. We’ll sit down with the family and the investment advisor and if we’re, you know, gonna be the trustee and have a purview over investments, uh, typically we’ll sit down, uh, put together investment policy statements so it becomes sort of the, uh, um, I don’t wanna say grading sheet, I guess for, for the advisor.
On a quarterly basis, uh, we’ll put together the asset allocation and then, you know, the investment advisor will fill it in [00:24:00] with what they think are the best. Means to, you know, get returns in those, those asset classes. And then typically we’re getting on the phone with the family and the investment advisor on a quarterly basis to, to review the portfolio, see how things are going, uh, check it against the investment policy to statement and make sure that things sort of aren’t out, aren’t out of bounds.
And you kind of rinse and repeat, re rebalance. And, uh, we find if you get into this sort of quarterly cycle, it really is helpful a, for the families to get to know us and understand what’s going on. B also for family members that maybe are younger and aren’t as experienced in the investment world, this is a great way to get, you know, sort of clued into how this works and, uh, understand what’s going on.
So, you know, one day maybe when your parents aren’t here, you’re, you’re in a position to be able to take over and whatnot. Mm-hmm. And then typically on once a year, we like to get together with a family face to face and, uh, you know, whether it’s having a meal or whatnot, but. Really try to understand what their issues are and what the, what’s going on with the family dynamics so [00:25:00] that if we have to make a distribution decision, we feel like we have full information to be able to do that.
Mm-hmm. And, uh, you know, I can’t underestimate, you know, how important that is in terms of, you know, risk when you’re, when you’re trying to make those decisions.
Patrick: Yeah, yeah. No, I think that’s great. You mentioned KYC, which is know your client. Yep. Sorry. Uh, you know No, no, that’s great. And, and I think you’re, you’re doing a great job of that and you know, really.
KYC is all around like money laundering and making sure you know where the money’s coming from and who these people are and, uh, that type of thing. And I think it’s great that you’re, you’re going okay, and let, let us understand you and your thinking and your thought process. And now, uh, again, it just helps with, uh, serving the client well, it helps reduce some of that liability piece that that’s, that’s hanging out there.
You brought up an interesting point about, uh, investment policy statement. We, we love an investment policy statement for our clients, especially dealing with the entrepreneur. They have, uh, they’ve got lots of unique investments, right? They, they might [00:26:00] have real estate portfolio, they’ve got a business that, you know, is probably the majority of their wealth.
Uh, but they also come across all these unique opportunities that are. Uh, you know, private opportunities to make investments, uh, might be moonshot type deals. Um, and, and so I’m thinking about this and I, I find it interesting, you know, we see, um, we see the entrepreneur likes the entrepreneur, uh, pathway.
And so like, Hey, I, I could see, you know, creating some piece of my assets that will support. The next generation, starting their own thing. Um, so do you see that coming into investment policy statements like, Hey, we’d like to take 10% of our assets, or 20% of our assets, or some some dollar figure that, uh, if somebody wants to start a business, they need to create a business plan.
And, you know, is, is that something you guys are seeing regularly? You’re reviewing, uh, going, all [00:27:00] right, yeah. Does this make sense to make this loan to this family member? Um, yeah, I’m, I’m just generally curious about that.
Antony: Yeah. Typically we don’t see it in the investment policy statements, but we typically will see it in the trust document, in sort of the, just positive, the, the just positive provisions, which means these are the provisions within the trust that tells you how you are allowed to make distributions.
And so there may be language in there to that, that effect, like, you know, I, I, I want the trustees to consider. Uh, you know, for my son, giving him a loan to start a business if he’s got a business plan or whatever it might be. So. If the trust document is well thought out, you know, a lot of that language should be in there to sort of take care of that.
Patrick: Yeah.
Hey, real quick, if this conversation is getting your wheels turning and you’re realizing there might be some opportunities you’re missing out on, I wanna invite you to check out vital strategies.com/tax where we can discuss advanced strategies specifically for entrepreneurs who want to reduce [00:28:00] taxes, protect wealth.
And structure their finances more intentionally. Whether you’re already using trust or just getting started with your estate plan, we’ll help you find the right strategies that can help you move the needle. Again, that’s vital strategies.com/tax. Now, back to the show. So far our steps are, you know, if you’re thinking about putting your trust together, even if you have your trust, you know, get in touch with Sterling and figure out how they can be, uh, involved as trustee and then.
We’re, we’re building a plan around the trust by getting connected to, to solve the legal counsel that understands, uh, how to build a, a trust in South Dakota. And then we figured out what the administration looks like. You know, we’re having quarterly meetings. We’ve created our investment policy statement.
Is there anything else from a. A setup and structure point of view that you think is a critical part of that, that process that we also need to talk about?
Antony: Yeah. No, listen, that’s a good question. I would say the number one thing that I see is really in order for the trust to be [00:29:00] successful and for beneficiaries to hopefully benefit in a way that doesn’t sort of cycle their ambition and whatnot.
It really comes down to the parents and sort of the values that they instill in their kids as young kids in terms of. How they look at money, how they respect money and, and, and so forth. If those skills aren’t taught at a young age, sort of, everything sort of goes off the rails. And that’s where my psychiatry piece comes into play in terms of, you know, deal dealing with beneficiaries and having to tell them why, you know, taking a million dollars out of the trust for Lamborghini is, is just not gonna work.
So I think really the key is, is on the parents and, uh, you know, try to teach them, uh, good values, you know. Learning how to do chores, getting, getting a, an allowance, all those sort of things have a monumental impact on, you know, the kid’s ability to deal with money long term and respect it so that, you know, even though they might have a trust that they’re gonna benefit on, you know, how, how can their kids benefit as well, you know, going down the line so that everybody could Yeah.
Benefit [00:30:00] long term.
Patrick: Yeah, no, I, I love that, that, that’s fantastic. And. That’s something we, we really, um, spend some time with, with our clients when they’re, they’re trying to create these trusts. It’s like, all right, let’s, let’s really think about core values and, and things you, you know, want your, your family to know and understand.
And, uh, let’s, let’s get these, these things built into our, uh, DNA early ’cause. There’s some really interesting research out there that, um, uh, I, I got this from a book called the, the Comfort Crisis. And it doesn’t matter whether you have a billion dollars in your trust fund that’s supporting you or you are sort of the average Joe.
Like we find a way to create stress in our lives. We look at it, uh, money is thinking it will solve all of the problems. It just creates a whole different set of problems. And so. Um, I think keeping that in mind, you know, most people think, oh, if I just had more money, life would be better. And, uh, that is, that is not always the case.
So if you can [00:31:00] instill that in, in your, uh, kids early, that like this money’s just a tool. Uh, it’s not going to make, uh, uh, it can make your life comfortable, but it’s not going to make it significantly better. Uh, you know, there’s, there’s all sorts of data it says above a certain threshold. Uh, it really doesn’t increase our happiness.
So, um, that’s great. I appreciate them. So. Now I’d like to maybe shift a little bit and just talk about, uh, things that you see done poorly. You know, um, and maybe so we can give our, our clients and, and listeners a, um, you know, if there’s, if there’s things that go into trust that you’re like, man, uh, we’ve seen this, we didn’t realize that was going to be a problem, uh, or that the client didn’t realize it’s going to be a problem.
But when it comes to administering this thing. It really, really is a challenge. So is there anything along those lines that you, you see that, you know, maybe come across your plate? Um, my guess is you probably see all sorts of different types of trusts and creation, um, setups and, uh, some probably work better than than others.
[00:32:00] So is there anything that that comes to mind there?
Antony: A couple things. One, uh, you know, really is on the trust creation part and really, you know. Maybe 20, 30, 40 years ago. I mean, trust documents were written. They would write in Bank of America, for example, as the trustee, and there was no way to remove ’em and whatnot.
And yeah, you know, when you were picking a trustee, it almost became like a, a life decision you were making. Mm-hmm. Really today, if, uh, you know, the trust and estate attorney, and this goes back to the conversation we had around, you know, employing a good, a trust in the estate attorney. You want to make sure you build flexibility into the trust so that there’s.
The ability to remove the trustees, the ability to change the site of the trust so you can, you know, if you wanna move it to another state or whatnot, you have that capability. I think the other thing that families should think about, you know, a lot of trusts have sort of age dates, and what I mean by that is, you know, once the child reaches 25, 1 third of the trust can be distributed out and 50 another third and so forth, then.
Again, you know, [00:33:00] that’s a personal decision on the family side. But, you know, one of the things that families don’t think about is what happens if a kid gets divorced and, uh, you know, a distribution gets made and, you know, all of a sudden next day they get divorced, having that money disappears. So, you know, sometimes leaving that to the discretion of the trustee, you know, really can protect the kids long term in terms of asset protection and, uh, yeah.
Uh, so those are some things to sort of think about.
Patrick: Yeah. Yeah. No, I, I absolutely agree with that. We. We talk so much about, um, okay, what is the lifestyle lifecycle of this trust? Right? Like we, we could, uh, start to distribute it, but we don’t see a whole lot of benefit to that. You know, we, we see the creditor protection of the trust being so valuable and the number one creditor out there is a divorcing spouse.
And so, um, it’s like, why not just leave it in the trust? You can enjoy all of the benefits of those assets. Without having to own them personally. And same thing’s true. If I’m driving down the road and I run into a, [00:34:00] you know, school bus full of lawyers’, kids, you know, it’s like, um, I’m better off leaving those assets in the trust, especially the South Dakota Trust.
It’s got privacy, it’s got incredible creditor protection, uh, you know, all of those things, uh, versus having it in my own name and exposed to those that, that liability. So,
Antony: I mean, listen, it’s a, it’s a. A tough decision for parents. I mean, some parents just like. I don’t wanna rule from the grave. And people, they’re like, listen, I’ve enjoyed my life.
I’m leaving lose money in this kid. So hopefully they’ll take care of it. And if not, you know, it’s not my problem, I’m dead. But, um, they don’t think through their ramifications of what that does long term to, to the family and, uh, uh, for all the various things that we’ve, you know, already stated here. But, uh, yeah.
Um, but I think the really, the key at the end of the day is making sure that the trust is well drafted. There’s flexibility. And one of the other things that’s really important is, um, uh. One of the other roles in a trust document is the role of the protector. A protector is like a super fiduciary, and [00:35:00] basically the power of the protector is to really be able to fire the trustee at will.
So if we’re not doing a good job, you know, we should be able to be removed easily as well so that you have, you know, sort of protector looking over my shoulders, uh, as I’m potentially looking over the shoulders of the investment advisor. And then you’ve got an independent custodian, so you have sort of accountability all the way down the line.
You’ve got good separation of duties and it really is, uh. The best model long term for the family.
Patrick: Yeah. Yeah. No, thank you for bringing up trust protector. When you were talking about flexibility, that was something that, uh, I was thinking of. ’cause I, I’m gonna identify what I believe, you know, a trust protector role is and I’m, I know, just enough to be dangerous.
So please feel free to correct anything that I said. Uh, a trust protector’s there to really do, like you said, okay, if the trustee’s not performing their job the way we think they should. Let’s, you know, we can replace them, but I think their role is much bigger than that. They can also look at changes that are taking place in the legal, uh, I don’t know, [00:36:00] cultural landscapes and go, okay, you know, uh, these things now don’t apply to this trust and we need to make some adjustments, and so we’re going to, we’re going to do some of those things.
Is that, is that a fair assessment? Is that
Antony: Yeah, no, I, I, listen, you can give a protector a lot of different powers. I mean, sort of the. Most general is, is the ability to hire fire, but I mean, you can also give them the ability to approve a distribution with a trustee. So you’ve got a, you know, sort of a second opinion on that.
Um, they could also, uh, review investments and all sorts of things and, and then also make legal decisions as to, all right, maybe we need to decamp this to another state or change, change language if it’s an administrative language decision, uh, that that can be changed. So, yeah, I mean, it just gives the family a lot of flexibility when, you know, you can disperse those roles to keep sort of everybody honest, for lack of a better word.
Patrick: Yeah. And would a trust protector generally be like a [00:37:00] law firm? Who, who’s going to fit in that role? I know it could be my, my uncle, but, uh, yeah. Is there, is there a. Somebody that feels, you
Antony: know, you, you want somebody that’s familiar with trust and, and has some legal knowledge and whatnot. So typically you do see, you know, lawyers serving in that role.
Um, you know, it could be a family member that maybe is in the financial services business that understands all this stuff. So, you know, you really do need somebody that’s knowledgeable. But you know, a lot of times there’s a family member or a beneficiary that, you know, serves in that role, uh, for better or for worse, uh, just to have.
Sort of better control over the trust. But I think, uh, you know, picking somebody that’s got knowledge, you wanna pick somebody that’s gonna be around, you know, a lot of people, they set up a trust when they’re 50, 60 years old, they’re picking their lawyer who’s the same age and you know when they die, you know the protector’s getting ready to die.
So you want to make sure you’ve got somebody young or you’ve got a succession plan in place to replace that person with somebody younger that you know, you, so you have that continuity going forward.
Patrick: Absolutely. And I think that goes back to [00:38:00] our, um. Our review process. We like looking at those every five years and go, Hey, you know, because it’s so tempting to go, you know what, I’m gonna put my, my brother into these roles, you know?
Uh, well guess what? Your brother’s probably close to the same age you are, and he might not be in a position to, you know, uh, make any of these decisions. So it’s like, it might work now when I’m in my forties, if I, something happens to me, my brother can make those decisions. But, uh. Long term that’s, that’s not a viable solution.
Right. And so I think making those, those fine tuning adjustments, we, we like to talk about estate planning as a, a motion picture as compared to a photograph. It’s not a, you know, one and done. It’s like, you know, it’s going to be constantly changing and we just need to keep, uh, uh, evolving as, as time goes on.
So, that’s exactly right.
Antony: And, and listen, that’s one of the biggest issues with, uh, with, uh. Individual trustee is, is the aging out. And uh, as you said, you know, you set up the trust at 40, you know, nothing really to be done, but you [00:39:00] know, yep. When they die at 85, you know, they’re also gonna be 85 or 80 or whatnot.
And you know, right now you’ve got a problem. That’s where, you know, having a regulated corporate trustee, you know, eliminates that problem. Yeah, no, this is,
Patrick: this is great. Now, I, I think about the, the benefits of, uh, a trust. We haven’t spent a lot of time talking about that, but I, I think there, there’s so many that, uh, it almost is once you get above a certain threshold, uh, it, it’s almost unimaginable that you don’t have a trust, right?
Because the, the benefits are outweighing the, uh, the downside. Now, there also is a level of. Uh, I don’t know, I’m gonna call it, uh, planning Tolerance. You know, you can create a super complex trust structure that goes on for, you know, eternity, right? Like put up, uh, one in South Dakota, and you can, you can have this thing run together forever.
Um, you can also create tons of tech creditor protection and you can move it out of your state, uh, your, the [00:40:00] state you live in, right? Um, but all that is, is somewhat, uh, of a burden. But I think as, as our wealth grows, we should really consider like layers to this process. You know, in my mind we get over a million dollars net worth.
We need, you know, probably a revocable trust and the standard will documents and then we, we start looking at, okay, that’ll probably do us until we get to the point where, um, we’re gonna have an estate tax problem. Now we should start looking at rev irrevocable trust. Uh, so our assets can go in there and we can.
Sort of freeze, uh, or discount that, that estate tax, um, issue. And then we could look at charitable opportunities and all of those other things. You know, the trust, uh, can really come into play. But we, we’ve done a lot of math for, for clients that have, you know, got businesses worth a hundred, $200 million and, you know, getting those assets moved into trust as that business is growing.
Uh, you know, there’s some discounting that can be done, but it, it can save. You know, the estate tax is 40%, so on. [00:41:00] Everything over the exemption amount, uh, which right now is, um, I don’t know it off the top of my head, 20 some million dollars for married couples. Um, you know, if we’re at, uh, $70 million at at 40%, there’s $28 million that I just paid in estate tax.
And it’s like that, that number makes me wanna throw up. Yeah. Uh, good generation
Antony: skipping tax potentially later down the line.
Patrick: Mm-hmm. Yes, yes. And, and then there could be state. Uh, estate tax on top of that. And so it’s like we, we just believe that the, um, the estate tax is the only voluntary tax you can, with enough time, you can plan around that, that, that tax.
And so, uh, we, we think it’s something that people should, should start addressing. And if you don’t, uh, if you don’t have a plan in place, uh, call Anthony and Sterling and, and sort of get that process going. Call our office. We’re, we’re happy to, uh. I get that going for you. But, um, there’s, uh, just tremendous [00:42:00] benefits for having trust.
Uh, and then we’re gonna go back to the things you initially talked about. You’ve got control over those assets. You know, they’re not getting probated, uh, they’re not becoming public. Um, there’s creditor protection. There’s just, there’s, uh, the list goes on long, on and on. We could probably have three or four more podcasts talking about all the benefits of, uh.
Of creating a trust, but the short answer is like, uh, if you wanna get that process started, uh, get in touch with, with Anthony and their team and they’ll, they’ll help you, uh, get going. So good. Anything else that we should be talking about in regards to, uh, building or structuring our trust?
Antony: I think we’ve done a pretty good job, you know, covering it.
I mean, I think, you know, the hardest part is just getting off the dime and doing it. I think a lot of families just. They get distracted. It’s not something they really want to talk about with, with their families or their wives or whatever. And um, you know, so it just gets put off and put off and put off in, you know, meantime and you’re accumulating wealth and then you potentially tip yourself [00:43:00] over into an estate tax situation.
And now, now you’ve just created a problem, you know, needlessly and uh mm-hmm. So, you know, I think the key is really. Get it done early, um, you know, look at it every year. So, you know, you need, if you need to make changes and update, but, you know, if you’re a successful professional in creating wealth or you know, you’re an entrepreneur or you’re in a business where maybe you’re getting stock options or equity and you know, the business starts doing well and all of a sudden, you know, you’ve got pretty big equity stake there.
Um, you know, the key is do it early and, and get off the die.
Patrick: Yeah. No, absolutely. And Anthony, I also wanna just touch briefly on, you guys are also very proactive on the, the software side of things. Uh, you, you’ve developed some software to help you just administer the trust and, uh, I appreciate that too.
So much of our, our industry feels like it’s left in the stone age with, uh, paper files and, you know, sending out faxes. And it’s like, who’s doing that anymore? So. I don’t know if there’s anything you wanna touch on, on that side, [00:44:00] but, uh, I just want to acknowledge that as well.
Antony: So I think the, unfortunately the trust industry is sort of the ugly redheaded stepchild of the financial services industry.
I think we’re sort of way behind in technology and whatnot and, uh, you know, a lot of trust companies today are just completely un automated, paper driven, and, uh. With these complex structures, if you don’t bring technology to bear, you really can get your hand to you pretty quickly with all the fiduciary and regulatory risks that, that you need to manage.
And, uh, I think bringing technology to bear, uh, you know, allows you to do that. So we’ve created a, uh, an app that actually sits on top of Salesforce that really automates a lot of our trust officers activities so that, you know, we can spend more time with our clients understanding what their issues are versus shuffling papers back to the office, uh, trying to document it all.
I think that’s the key to be able to grow successfully in this business and, and, and service your clients, uh, well.
Patrick: Yeah.
Antony: I love it. I love it. So
Patrick: if somebody wants to connect with you, you know, there’s the contact page on your website, [00:45:00] um, we’ve got your phone number, email, there’s all sorts of different ways.
Uh, is that the best way to, uh, really reach out? However, people prefer, you know, if they want to connect in person on the phone or. Or via email? Is that, is that the best way to
Antony: No. Go to our website. We’ve got a great website. There’s a lot of information on there regarding types of trusts, why South Dakota is a great place to be.
And, uh, so you can learn a lot on there. We’ve done a lot of white papers and whatnot. So our, you know, our website is, uh, sterling sterling trustees.com again, uh, sterling trustees.com. And you know, you can contact me directly at, uh, 6 1 0 2 3 4 0 6 2 6. Again, 6 1 0 2 3 4 0 6 2 6 send. Happy to have a conversation ’cause this is not an area that a lot of people feel comfortable with.
And you know, that’s what we are here to do is really try to hopefully relieve some of that anxiety and get you going in the right direction.
Patrick: I love it. We’ll, we’ll have all of that information in the show notes and yes, I’ve spent a fair amount of time on, I. Uh, Sterling Trustees dot com’s [00:46:00] website. Just, uh, there’s videos, white papers.
We’ll, we’ll have links to all of that, uh, in the show notes as well. So if you wanna, you wanna check that out, go, go spend some time there. It’s a, it’s a great resource to, uh, just learn more about, about the process. But, uh, yeah, if you’re ready to get started in this process, reach out to Anton and their team and they will, um, they will get you going.
And, and I just think about what success looks like, right? Um. There’s almost no downside. There’s a little bit of cost to set up our trust, but, uh, you know, it creates, uh, creditor protection. Uh, anonymity makes the estate administration process seamless. You don’t pay, you know, in the state of Iowa, you pay an attorney 2% to probate an estate.
So if you’ve got, you know, a $5 million, uh, estate, there’s a hundred thousand dollars that you’re, you just paid out to an attorney to, to probate that. And so. Um, that doesn’t make any sense from our point of view. We think you should spend less than that, getting your, [00:47:00] uh, estate documents all set up and and done.
And it is just, it’s just a win all the way around. And if you don’t, you know, we, we look at, you know, there could be fighting with the, the family. You know, we just we’re talking about that family that was suing each other for quarter a million dollars. You know, uh, it eliminates all of those pieces. It keeps all your information private, it keeps your.
Uh, your goals and objectives and keeping the money in the family, you know, line, uh, forever, uh, if you want it that way. So it just, it just makes sense on, on so many fronts and, and I just think about all the work that, uh, our entrepreneur clients put into, uh, building this wealth. Uh, we hate to see it, you know, uh, paid out to excess fees, uh, attorneys fighting, family members, uh, all of those things.
So. Estate tax, that that all, uh, is just not good. So we think setting up a trust is a, is a critical piece. So. Anthony, I, I appreciate you taking the time and, uh, just giving us lots of wisdom and insight into, um, [00:48:00] the trust administration process.
Antony: Thanks for having me on today.
Patrick: Thanks so much for tuning into this episode of the Vital Wealth Strategies Podcast.
I hope you found this conversation with Anthony Joffe. As valuable and eye-opening as I did, trust can be a game changer, not just for preserving wealth, but for creating real clarity and control over your financial legacy. If this episode helped you think differently about your estate or sparked some ideas for your business.
Please take a second to share it with a friend, a client, or someone in your network who could benefit from it too. And don’t forget to check out vital strategies.com/tax for advanced tax strategies, resources, and ways to get started on building your own wealth strategy today. And remember, you’re a vital entrepreneur.
You’re vital because you’re the backbone of our economy, creating opportunities, driving growth, and making an impact. You’re vital to your family creating abundance in every aspect of life. You’re vital to me because you’re committed to growing your wealth, leading with purpose, and creating something truly great.
Thank you for being a part of this incredible community of vital entrepreneurs. I appreciate you and I look forward to [00:49:00] having you back here next time on the Vital Wealth Strategies Podcast, where we help entrepreneurs minimize their taxes, master wealth, and optimize their lives. Until then, keep going, keep building, and stay vital.