"One thorn of experience is worth a whole wilderness of warning." - James Russell Lowell

Rather than seeing these ideas as "rules",  it might be helpful to think of them as principles when it comes to helping your kids see money rightly.

And yes ... some of these may be difficult (the first ones, in particular, if they represent a shift for you), but after seeing many families do this well, these are some of the best things you can do with your children when it comes to financial education.

1. Talk openly about money.
Parents make a mistake when they keep information from their children. The only way children learn what is a good deal and what is too expensive is by the experience of what their family earns and what items cost. Hiding this information robs children of the financial education they need.

2. Talk factually about money.
Many parent
Read More...

In our last article, I taught you that the Series LLC forms the base of your asset protection structure. It’s simple, inexpensive and provides a great deal of protection. And you’ll learn the basics of how to run and manage an LLC before getting more complicated.

Many clients, especially as they build their portfolio of rentals, seek out additional privacy and protection. This is great! But it does add layers of complexity and cost. But, as your assets grow, then it makes sense to up your asset protections as well.

For privacy, many investors use what is called in the real estate industry as a “land” trust. These kinds of trust do not exist in Utah and most of the country. But we have a modified version of them investors use that we call “real estate” or “property” or “asset holding” trusts. The key to this trust is that it’s not registered with the state. That means it’s a private document that keeps the owners of the trust totally off the record.

Most investors use these trusts to “hold title” to the property privacy purposes. However, these trusts do not provide any asset protection! So, you still need an LLC that will own the trust. Then the trust owns the house. See how that sticks an extra “layer” in between the property and yourself?

On the county land records, only the trust appears, not your LLC. And since the trust isn’t re
Read More...

"It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something." - Franklin D Roosevelt

If you measure your key metrics you can manage the performance of your business, AND you can see problems well in advance of when they might show up in revenue or profit figures.

Each and every business has key performance metrics [Key Performance Indicators (KPI's)], some of which are common to other businesses, some are industry-specific, and some companies create their own KPI's.

These sort of things are our bread and butter, when working with small businesses tax pro.

Do you need help?

Financial metrics are often common to all businesses. Some examples include:<
Read More...

"A man should always consider how much he has more than he wants." -Joseph Addison 

The financial picture for the various states in our nation is a mishmash of various revenue sources (and expenses). 

Unlike, say, the federal government, the states cannot print money. So, they are forced to go hunting for it. And they get it from a few primary sources: sales tax (based on purchases/consumption), income tax (individual and business taxes based on income), property tax and "other" taxes like the tax on fishing licenses, driver's licenses and a lot of other smaller items.  

And the most volatile -- and COVID-affected -- of these sources is ye olde income tax. Sales tax has obviously tak
Read More...

In Parts 1 and 2, we explained that loaning your own money could be a licensed or regulated activity. We also explained that loaning other people’s money for a fee is always a licensed activity. The other risk I see is when investors are doing these loans without the proper protections. Here is a good checklist to follow.

1. Confirm the licensing issues for the kinds of loans you or your pocket lenders are making.
2. Be competent at valuating the property and do so yourself. Do not rely on the borrower’s numbers. Learn loan-to-value!
3. Always use a well-prepared promissory note (loan document). I see many that are not sufficient. You should have one drafted by an attorney, not a title company.
4. Always secure the loan with a trust deed (mortgage). ALWAYS!
5. Always run the loan through a title company or attorney’s office that confirms the recording of the trust deed in the appropriate position! The biggest fraud in real e
   Read More...

In Part 1 we defined various types of loans and mortgages, which you should read if you haven’t. Be clear that making a closed-end, first position loan for the purchase of real estate is a licensed activity. This is where a lot of investors are taking a big risk.

This is because many investors are loaning funds without understanding the licensing issues. And many others are getting friends and family to loan them money. This can put your Uncle Joe or Aunt May at risk as well. While there may be arguments or exemptions that permit making these loans, there are arguments that it requires a mortgage originators license! The Division has broad authority over these kinds of loans!

Just because there are arguments in your favor, does not mean you will be successful if you—or your lenders—are investigated by the Division. If they deem that you have engaged in mortgage loan origination, the fines can be very steep. Before you engage in making or getting these loans from others, you should truly understand the rules and risks, and how to structure these loans correctly. That is beyond a blog post. You should consult an attorney.

In the above examples, I have assumed that the lender earning the interest is loaning his own money. There is a big difference if you are loaning other people’s money in which you make a fee or spread. What you’re doing now is “connecti
Read More...

"Oh, my friend, it's not what they take away from you that counts. It's what you do with what you have left." - Hubert Humphrey

As difficult as it might be right now, let's project forward to next year.

Let's cross our fingers and believe that we all get through this donkey of a year that is 2020.

Maybe you have a business that clung to life, and you're headed towards recovery in 2021. You took the PPP, or perhaps the EIDL (or both). Or perhaps you had to take unemployment for a period of time, but are slowly (but surely) getting back on your feet. The economic stimulus checks helped.

But then ... taxes are due.

Uh oh.

W
Read More...

Over the last year, I have seen a dramatic rise in “hard money” lending not only among investors, but by friends and family of investors. Almost all are doing so without understanding there are rules and risks with lending. To understand these rules and risks, we’ll start with defining lending terms.

Private lending is any loan between a borrower and a non-institutional lender. This could be a loan from your father for the purchase of a car or education. Private loans can be unsecured or secured on things like vehicles, personal property or inventory. Private loans are generally not regulated.

Hard money lending is a private loan that is secured on a hard asset like real estate through a trust deed. Also, these loans are often referred to as “mortgage” loans. Mortgage loans are regulated. And may require a license to provide!

A closed-end mortgage is a loan for a fixed principal amount that is paid down, like most mortgages you think of. An open-end mortgage has no fixed principal. A HELOC is an example of an open-e
Read More...

"The only way around is through." - Robert Frost

With unemployment numbers through the roof (officially at 14.7 %, though the real numbers are likely to be  Read More...

The asset protection trust is more accurately called the Domestic Asset Protection Trust or “DAPT.” It is a highly protective, irrevocable trust and less than 20 states even allow them. Utah is one of the! Assets owned by this kind of trust can be protected from lawsuits, debt collection, judgments, bankruptcies and even divorce.

This is a different kind of trust than the family trust. In the family trust, you leave your assets to beneficiaries, like your children. In the DAPT, you actually leave the assets to yourself as beneficiary! That means they are still your assets; but they receive the protection as if you’ve already given them to someone else. That’s the key difference. However, it’s not for everyone.

First, this is a complicated and detailed trust. It’s usually more expensive to create and maintain than the other two types of trusts. Second, while you do have access to the income from trust assets, you cannot take “regular” distributions. So, if you need that income to live on and pay monthly bills, you can’t put those assets in this trust. There are also restrictions
Read More...