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Senior Housing Investors
Your Legacy Shouldn't Be Destroyed by Capital Gains Tax with Brett Swarts
Brett Swarts reveals how the Deferred Sales Trust offers freedom, flexibility, and tax deferral for high-net-worth individuals exiting businesses or real estate investments. This innovative strategy provides an alternative to traditional 1031 exchanges by allowing sellers to defer capital gains taxes while creating truly passive income streams.
• Understanding how capital gains taxes can take 20-50% of profits when selling appreciated assets
• How Deferred Sales Trust works as an installment sale with a trust that provides complete investment flexibility
• Real-world examples including a dental practice sold for $16M generating $120K monthly in passive income
• Differences from 1031 exchanges: no like-kind requirement, no tight timelines, ability to diversify investments
• Using DST for business sales, Bitcoin, and real estate with 30-year track record of IRS compliance
• Joint venture opportunities allowing entrepreneurs to partner with their trust for new ventures
• Fee structure typically 1.5-2% annually plus one-time legal setup costs
• Estate tax benefits that can remove assets from taxable estates without charity or life insurance
• Practicing "stewardship over ownership" mindset to create generational wealth and family legacy
To learn more about implementing a Deferred Sales Trust strategy for your exit, visit capitalgainstaxsolutions.com to schedule a free consultation or pick up Brett's book "Building a Capital Gains Tax Exit Plan."
Truly passive income is to your freedom and impact, as compounding interest is to your money, and so the mindset here is to focus on how do I become truly passive in my income?
Brett Swarts:The big mistake most people make is they think that the 1031 exchange is the only way to get there, or even they think that the opportunity zone sounds really, really sexy on its front end, in the sense that, hey, after 10 years I don't have any tax right. Well, people want truly passive income now. They don't have to wait 10 years for a project to be built, or a project to cash flow it can take three to five years to cash flow, depending if they're building it from the ground up and all of these different things to five years of cash flow, depending if they're building it from the ground up and all of these different things. And so we have found that those that have already built the massive wealth they want to unlock the harvest of that and unlock what's called freedom and flexibility with their time, their energy, their next venture, and that's where the Deferred Sales Trust comes in.
John Hauber:Welcome to the Senior Housing Investors Podcast. If you are an owner operator, investor, developer or buyer of senior housing, you've come to the right place. The best way to stay connected with us is to sign up for our weekly newsletter at havenseniorinvestments. com. This podcast doesn't exist without you, our community. Thank you for listening and reach out to us anytime.
Kelsie Heermans:Welcome back everyone. Imagine you dedicated years building your business, meticulously investing in Bitcoin or strategically acquiring real estate, achieving millions in revenue. Now picture the crushing blow of losing a substantial portion of your hard-earned gains to capital gains taxes upon exiting. But what if there was a better way? Today, we're exploring precisely that a proven, game-changing approach to capital gains tax exit planning that gives you the freedom and flexibility you crave, defers your tax obligations, enhances your cash flow and, most importantly, multiplies your impact for your family and your most valuable people.
Kelsie Heermans:Joining us today is Brett Swarts, a recognized expert in capital gains tax exit strategies and real estate investing. Brent has spent his career studying, refining and implementing successful tax deferral solutions and is now on a mission to teach others how to leverage an innovative proprietary strategy known as the Deferred Sales Trust. If you're looking to structure your exit plan effectively whether you're selling your business, bitcoin or real estate, and want to reinvest passively with greater confidence and control, you're in exactly the right place. Stay tuned, as Brett shares powerful insights and actionable strategies you can apply right away. Let's dive in, john.
John Hauber:Thanks, Kelsie. Brett. Welcome to the show. Let's dive in. Great to be here. Thanks for having us. Yeah, many of our listeners are real estate investors, as you know, and some are operators. Others are more passive and they're either approaching an exit or planning one down the road. The biggest concern, we hear capital gains tax. So let's start at the top. What exactly is the deferred sales trust and how does it differ from traditional strategies like a 1031 exchange or opportunity zone investing?
Brett Swarts:Yeah. So most high net worth individuals, when they go to sell, they have a capital gains tax on some kind of asset, whether it be a senior housing, a citizen living facility, whether it be a business, whether it be Bitcoin or stock, and so the gain is going to be taxed. You're in Texas, so it doesn't have any state, but you still have that 20% federal and that 3.8 Obamacare. On most sales, that's about 24% of the gain. So if you sell something for a million dollar gain, well, that's $240,000 of tax. I take that by 10 million, like you're in California, well, you can add another 13.3, so now you're at like 37, maybe up to 40 percent, with depreciation recapture.
Brett Swarts:So we like to say that the big problem is people are facing somewhere between 20 and 50 percent of their gain being crushed by capital gains tax. So that's the big problem we're going to solve. And so the question becomes well, how can we solve it? Solve it right, or what can we do to mitigate or to defer or to delay the tax in order to compound the wealth? And that's the first concept that I think we should focus on is in most people actually want truly passive income right, which is the ability to get completely passive and not have to trade their time per dollars anymore. And so the first concept I want to start, before we kind of go into the tactical of what a deferred sales trust is, is that this is this that truly passive income is to your freedom and impact as compounding interest is to your money. And so the mindset here is to focus on how do I become truly passive in my income? The big mistake most people make is they think that the 1031 exchange is the only way to get there, or even they think that the opportunity zone sounds really, really sexy on its front end in the sense that, hey, after 10 years I don't have any tax right. Well, people want truly passive income now. They don't have to wait 10 years for a project to be built or a project to cash flow. It could take three to five years to cash flow, depending if they're building it from the ground up and all of these different things. And so we have found that those that have already built the massive wealth you know and have massive appreciation, they want to unlock the harvest of that and unlock what's called freedom and flexibility with their time, their energy, their next venture, and that's where the deferred sales trust comes in, and so the shift is making sure that you're very, very clear on what you're solving for. If you're just trying to, I just want to take care of this tax problem and they start looking at these different strategies.
Brett Swarts:1031 exchange deferred sales trust. Delaware statutory trust. You know cost seg studies, you may miss the point, you might be, you know, climbing a ladder, but it's to the wrong wall and you get to the top of the wall and go I didn't really want this, like I actually wanted that other wall. Well, you're climbing the wrong ladder, and so what is a deferred sales trust? It's simply an installment sale with a trust. However, the major benefits are freedom, flexibility, tax referral, liquidity, diversification, no like-kind replacement requirement, no 10-year hold requirement and, ultimately, what our clients love about it is it unlocks truly passive income, which is what most people want these days.
John Hauber:That's really eye-opening, especially in the senior housing space where you know a timing of a 1031 isn't always practical. Right Deals are nuanced and replacement properties can be hard to align quickly. And it's amazing how many individuals call me up and say I've got 18 days to identify three different properties. Brett, can you walk us through a real life example where a sales trust made a major difference for a client exiting a business or real estate deal?
Brett Swarts:Yeah, we'll start business and then we'll go real estate and then we'll go Bitcoin, okay. So on the business front, we just helped a client exit out of their dental business dental practice business out of Oregon. It was a $16 million exit a husband and wife and they started out as dentists and then they had their first practice and then they compounded to about six practices and they sold it to a big group and so they're facing 10% of the state of Oregon and 20% federal, so about 30%, okay, on the sale. So if you look at that tax burden you just take, it's pretty simple. You take 16 million by 30% and you're looking at the tax liability of approximately $4.8 million, right? So you go on one front, I can pay 4.8 million in tax and have, you know, 16 minus that, or I can have the full 16 in this trust that's owed to me over time and that's just. This is how this works. So instead of selling it and taking all of the cash all up front, they sold it to the trust in exchange for a promissory note. So the trust issued them a note, right? In other words, they became the bank to a trust. This trust owes them the money they sold it to the trust and the trust is gonna pay them back. Now I think on this promissory note we wrote it around 9% or 10%. So the note is set and now it's gonna pay them in installments and they'll pay slowly over time. So that's what happened and the trust ultimately sold it to the buyer. So they get the same thing they bargained for. But what happened here, john, is the trust bought and sold for the same price and the trust had no gain. So this is how it works. Right, it's really beautiful.
Brett Swarts:Now there's a third party unrelated trustee. That's our role here. We're kind of like an IRA company, we're kind of like a 401k company, kind of like a lot of these things, but we're not. We're none of those, but we have some similarities. So we perform the service of a third party early trustee. So this trust is set up only to do business with this.
Brett Swarts:Husband and wife and their children can step into their shoes and keep it going for as long as they want. But most people will do this fact pattern, john. They'll let the full principle go in and they'll just live off the interest. So for this particular couple, you know it's you know $16 million and it's just using 9% interest rate, that's about $1.44 million per year, or that's about $120,000 per month.
Brett Swarts:Now, realize they've been building their business for the last seven, eight, nine years blood, sweat and tears, all their time and energy. They've been building their business for the last seven, eight, nine years blood, sweat and tears, all of their time and energy. They've been taking a fair salary right, you know, equitable salary to keep their business growing and you know, and their employees and expansion. But at the same time, like this, changes their life, right, no longer do they have to wait to have the freedom and flexibility with their wealth. They, with investing tax referral are now, with investing in tax deferral, are now the unlock that truly passive income, right, and so that's the first story. It's fantastic.
Brett Swarts:We've invested into passive real estate and mostly passive private debt right now, which is so attractive, but we're also putting stuff into multifamily deals that have dropped in value drastically. We've put some into the stock market and we've put some into money market accounts. In other words, we diversified and we've dollar cost average. And this is the beauty of the deferred sales trust. It's not just a tax deferral on the capital gains tax, it's also ability to invest at optimal timing, which is really, really cool, in a diversified way.
Brett Swarts:The second thing I'll leave with you on this deal is they are staying with their company for a couple of years. In other words, they sold it to the company but they're staying on for two to three years to work with the company until they probably fully exit out. Okay, so they're still gonna get paid salaries over the next couple of years. Well, guess what? What's neat about the trust is the trust can delay that interest payment. So, although it's set at 9% or about 1.4 million a year, they can say, hey, I want to delay that, and therefore they're delaying their income tax.
Brett Swarts:So for at least two years they don't have, they don't take any distribution from the trust. So they have no state income tax, no federal income tax from the trust. Their working years they'll have some tax right, which is a part of it. And then when they stop working, guess what? We turn the trust on to start paying them, right. So you see how we can make this thing an investment and not an expense. We can get an extra ROI there because they can kind of control the. You know, think of it like a throttle or a spigot of water. Right, you can turn it on or turn it off in a flexible manner based upon your unique you know tax situation.
John Hauber:So let's take that example that you just had on the dentist and his wife. So they go to you. Okay, you basically do a promissory note with them 9%, okay. Once the property sells, that money comes to you. Is that correct? It comes to the trust.
Brett Swarts:Charles Schwab right, yeah, they have third-party access. They can see everything online. Nothing moves without their approval, or their signature. They become the creditor. The trust is its own entity, not commingled in any other trust or any other accounts. It only does business with them. But keep going.
John Hauber:So they still retain control over their investments.
Brett Swarts:Is that correct? They retain controls, so you probably had some lenders lend to you on some of your senior housing facilities. Yes, john.
John Hauber:Yes.
Brett Swarts:So do they have control over the day-to-day or control over the property? No, not. unless you don't pay the loan right, then they foreclose and they take back full control. Right, but they have controls and protections in place. So this is the biggest thing for people. Most entrepreneurs or investors are used to having what's called unilateral, 100% ownership control, although, if you think about it, if they're working with banks, they still have to, you know, be holding to the banks. Right, they have to send the income and expenses statement. They obviously pay on time, they need to get fire insurance, they need to do all these different things to make sure they're staying within the boxes of the lending requirements. So the lender has controls, but the owner of the real estate has ownership. Right, they're the day-to-day, so it's basically reversing it, right? So what they're doing is they're giving up, like the day-to-day management of the trust in exchange for controls and the ability to foreclose. As a bank, however, nothing moves without their approval of their signature, right? So that's important to understand. So, really, what do you want to know? You want to know that the funds aren't going to go somewhere that you don't want them to go. They're not going to be invested in something that you don't want to be invested in, that they're not going to be paying, you know, only paying the fees that have been agreed upon, right? So, like, you have all the access to see everything. We have a third party tax preparer that does all the P&Ls and it's like a C Corp tax return and it has issues all of the all of the tax documents, right? So that's all of that piece of it. We also have a third party tax attorney CPA that provides a lifetime audit defense, and there's also another eyes and ears A lot of times. We have a third party financial advisor that's working, you know, like a Charles Schwab. We have the third party trustee, so, like, we have all of these third parties that are all, in a sense, kind of being the checks and balances of the structure and of the process and of the movement of funds, and so all of that helps to create the transparency and the certainty of like, okay, I know that I can trust this.
Brett Swarts:By the way, if they've ever done 1031 exchange, guess what they have given up control, right? They just don't. They're like, oh, for 45 to 180 days, right? Yeah, the challenge of the 1031 exchange companies. You could be very careful about this right, a lot of them. They co-mingle the funds and it's dangerous right. So they have all these funds coming in from these different exchanges and they put it all in a one big pile. And even then some of these companies the ones that aren't doing what they should be doing they go, you know, landed or get arbitrage on it, and then something happens and then they're not able to use the exchanges. Like this is a very, you know, serious thing, and like people take that for granted that when you give up controls for a 1031 exchange, whereas the deferred sales trust is never commingled, nothing moves after approval of your signature. It's its own entity, its own accounts. So those are how we keep the protections there, john.
John Hauber:So, as you know, control is everything for high net worth individuals in many cases. So let's talk about who this strategy is really built for.
Brett Swarts:Yeah. So it's built for the purpose-driven entrepreneur right, the ones who want to actually control the timing of their investments. They want leverage over the negotiations. They don't ever want to feel trapped by that 1031 exchange. They actually want to start that new business venture, that new opportunity. And here's how we do it.
Brett Swarts:And this is the best kept secret. In fact, the biggest myth with the deferred sales trust is that, oh man, I got to give them all this control. I got to be completely passive. Now, that's certainly an option. People want the truly passive income and that's that's, let's say, 50% of our clients that are in that. Let's say that 65 and above age and they're really ready to harvest and be completely kind of done with the day to day. And I would say our other clients between the 40 years old to about 65, they're actually still in the game or wanna be in the game in the sense of being active. And this is what's so, so neat about this. In fact, this is the single best reason why I started this company is because I am that entrepreneur.
Brett Swarts:I grew up in real estate. I grew up building real estate with my parents. I grew up at Marcus and Millichap, understanding how to structure and buy investment real estate properties. Multifamily was my specialty. I grew up doing 1031 exchange.
Brett Swarts:In fact, it was all really really good, john, until the crash of 08. And I'll never forget the clients who were forced into these 1031 exchanges and they were having all of the controls with that one box type of strategy. Now lost everything right, and the reason they lost everything is because they had too much debt, non-luck liquidity or diversification and all of a sudden they had a debt problem. The banks were no longer willing to negotiate, they were calling loans and it was a mess right. In fact, we're seeing the same thing happen today. People overpay for properties. About two and a half years ago, interest rates have expired in the sense of the fixed part of it. Now they've adjusted to double the rate and the debt is sinking the ship right.
Brett Swarts:And the biggest culprit of that is the enemy of this, which is what your broker doesn't want you to know. They want to keep you in this 1031 exchange. Now, do they really want to do that? Well, they don't know anything else. A lot of them don't know anything else, or some of them don't know anything else, or some of them don't really want to know, or the exchange companies don't want you to know about this. And so here's what we do with the deferred sales trust, and I'll kind of move to the real estate opportunity now to give you an idea for this.
Brett Swarts:Okay, so we had a client in fact, they've done six exits with us now but they're a multifamily syndication expert and they have over 3000 multifamily units and talk about someone who wants to continue to build their wealth by themselves. Well, why would they use the deferred sales trust? Well, here's why. In fact, his name is David. You can hear his whole story on my YouTube channel. So David was selling these multifamily properties and the first one we sold was about a $20 million deal in Las Vegas and they had massive gains on it. But what they were finding was they were not doing 1031 exchanges for a number of reasons, a lot of them because some of their investors just wanted to get some of their money back and it was kind of just complicated. So every syndication, they would just pay tax and pay tax, pay tax. And so they said you know what, Brett, can we just take our GP position and can we move into the deferred sales trust? So David and his business partner, jordan each set up. We set up trust for each of them and each of their GP positions went into the trust and they went on to do this. Jordan five times, david, six times across $120 million of multifamily properties.
Brett Swarts:Here's the key. They said Brett, I wanna make sure that we can go back into our own deals. Can we do that? Yes. Can we go back into a real estate fund? Yes. Can we go into a lending? Yes. Can we go into money market accounts? Yes, most Can we go into money market accounts yes, most of these guys are not really big stock market guys, but can we do that? Yes, you can do all of those things. In fact, you can joint venture partner with the trust. This is so key, david, right, and this is what they did.
Brett Swarts:They joint venture partner with the trust and the trust put up the money and they went right back and do their syndication deal right, and this is the best part of the a new depreciation schedule on that LLC, which is really really important, versus the 1031 that has the old depreciation schedule. Okay, so we call this having a tax flow mindset and not just a cash flow mindset, and the mistake is thinking that the 1031 exchange is your end all be all, and it's not because you have an old depreciation schedule. The second part of it is the market started to shift right and so they were dollar cost averaging with the investments and they weren't also overly putting all of the investments all in one place. They kept some liquidity. The liquidity now is helping them a lot given the circumstances that we're in. And so you don't have to, you know, play all of your chips all into one thing.
Brett Swarts:You can be that entrepreneur to do your own deals. You can also diversify. You can joint venture partner with the trust and you be the managing member of a new LLC and you can go start that business. You can also develop real estate. Okay, we had a client who sold a $3 million business, deferred all the tax, and he used it to build multifamily from the ground up in Tennessee. This is huge right and an old 1031,. First of all, you cannot 1031 a business. Second of all, even if you could 1031 a business, you can't put it into unlike kind real estate right. In this scenario that's out the window. With the DST we can defer the tax on the sale of the business, joint venture partner with the trust and then build the real estate from the ground up and joint venture, partner with the trust and then build the real estate from the ground up.
Brett Swarts:And the last one I'll leave with you is the Bitcoin right I promised okay, client bought Bitcoin for $50,000 and it went to $50 million. Okay, she worked for Google, used to okay, saw Bitcoin at early adoption and just started to pour money into it. Okay, obviously, it went to the moon for her to it. Okay, obviously, it went through to the moon for her. And at 54,000 a coin, we exited five of that 50 million and we deferred about a 1.85 million to tax. Okay, no, having to move to Puerto Rico, not having to do any charity or life insurance or gifting Now. So now she's in a deferral state.
Brett Swarts:Now watch this uh, john, the the 54,000 goes up to about 68,000, okay, and then what happens? It crashes down to about 15,000. So that 5 million that we exited at 54,000 was really key because it was used to start a online Khan Academy, a like Khan Academy type of thing, right, where she's educating youth, something she's very passionate about. I gave her freedom to pursue her dreams, to make a difference for the people that she felt called to serve.
Brett Swarts:Fast forward Bitcoin's about 90,000 a coin, or 85 right now. She held on to the other all of that other 45 million, or, you know, it dropped all the way, probably, like I don't know, 15 million. Then it went over over a hundred million, right? So this is the ability of the trust. It's so great. You can sell high and she actually, you know, if she wanted to, we could have bought Bitcoin within the trust at 15,000 a coin and write it all the way back up Like it's literally the Netflix to the old Blockbuster, john, right, like the Blockbuster is 1031 exchange. What we have is the Netflix, because it just gives so much more flexibility than anything else out there.
John Hauber:So, Brett, I got it. I understand it. Now, many of our audience members are either selling stabilized senior housing assets or exiting after years of ownership, so naturally, the question of legality and IRS scrutiny comes up. Can you explain that?
Brett Swarts:Absolutely. That's the most important question. In fact, there's three things there's legality, there's controls, which you've already touched on, and then there's fees. Okay, so we'll start with legality. So the deferred sales trust is the most vetted capital gains tax referral that typically you or your CPA has never heard of until you hear us on like a podcast or you check out our book. Okay, all right, it's based upon IRC 453. Here's the good news, john you have heard about IRC 453. I mean, in fact, you know about it as a seller.
Brett Swarts:Carry back, for example, if John has a Texas senior housing facility worth $20 million and, for example, if he owns it free and clear, and, for example, if his depreciation is fully depreciated, he has zero basis. Just keep it real simple. Well, john can find Steve down the street and Steve could give a $5 million down payment and John could carry a note for $15 million. It's something that's very common and not as common for a number of reasons, mainly because now all of John's capital is tied to that old asset and he has other properties, he wants to build other places, he wants to invest, but he makes the deal because you know the bank's interest rates are, you know, 6%, 7%, and the other guy would have paid, you know, 18 or 17 million for it. So he takes 20 because he can carry the note. But guess what happens? The guy buys the property, doesn't know how to run it, and one or two years later he's renegotiating anyways or missing payments, which forces John to do what? Pay or foreclose on him to take the property back, you know, build it back up again, and now he's just you know, he's, you know, or write the note down at the loss, like this is the whole problem with the traditional 453 installment sale. However, that that installment sale goes back over 100 years like this is tried and true tax law. In fact, the same form, john, that we reported installment sale on, if you were to do that regular installment, is the same form that we report the DST installment sale.
Brett Swarts:So think of us like a structured installment sale, right, or a specialized installment sale. So that's the first thing to understand. Now let's talk about track record. Okay, thousands and thousands and thousands of transactions now, over a close to 30 year track record and billions and billions and billions of assets sold using it. Okay, across all the states and about every asset you could think of public stock, private stock real estate dentists, optometrists a big point primary luxury real estate, you know, apartment buildings, car washes. We just did a billboard sale in California for 17 million. We just did an $8 million automotive sale up in Massachusetts. We just did a $17 million land sale in Texas.
Brett Swarts:I mean we can go on and on and on about all the deals that are closing, and so that's really important to understand that this isn't something we're just trying for the first time. Hey, john, let's test this thing if it works out for you. No, this has already been proven. We've already proven the strategy, the structure. In fact we've been tested about 30 times with the IRS, state and federal audits, promoter audits. We've had no changes, no findings on any of them. So we're batting a thousand so far, legally speaking, through the IRS audits Very important, okay. The tax attorneys my business partner who are the ones that deal with the lifetime audit defense really important, that's included into it. So the track record is really perfect.
Brett Swarts:I'll leave another story here to keep kind of bringing this home. Okay, because a lot of people they'll go to their CPA and they'll say oh, mr CPA, I heard this podcast, would you listen to it? This deferred sales trust, First of all, their CPA typically gets confused with what's called a Delaware statutory trust Notice that they're both DSTs and all of a sudden that they're like well, it doesn't work for your business sale, or you know Delaware's, or you know and we'll talk. We can talk about pros and cons and, if you like, in a minute, but they get it confused and then, and then the moment they go, it's not that. Then they go wait, I haven't heard of that. What is that? And the problem, the challenge, becomes John, if you he's been there for your family and you have this connection with him, you would think that if you have an ACL surgery, he'd at least hear about that unique way that that ACL surgeon does it.
Brett Swarts:In fact, I played basketball in college. I had two ACL surgeries. I signed my scholarship and two weeks later I blew my knee out. It was devastating, right, and I'll never forget that. That, that uh, that doctor giving me that knee test. And you're in a state where they grab the knee and they kind of pull it up and down and he's like you're okay, you're good, you know, don't worry about it, you'll be back in two weeks. And I was like thrilled Cause I just signed that scholarship and I'm all excited.
Brett Swarts:I'm said, hey, Brett, get an MRI just in case, because this whole knee test the doctors cannot see the inside of the knee. You need to get that. I've heard horror stories of people who came back too early, blew their knee out and they're done for the rest of their career. So I go back to the doctor and say, mr Doctor, can I please get an MRI? I know it's probably fine. He's just, you know, really I think, kind of upset that I'm not trusting him. But I'm just kind of like being cautious.
Brett Swarts:So I I kind of sheepishly walk out of there with with the referral and you know, get in the car and drive. You know you're going to drive 45 minutes to downtown and this is in California and you're going to. You know, oh, hey, doctor, how's it going? Yeah, I got your MRI back. I'm like all right, how'd it go? You know I'm expecting to say all clear, you have a completely ruptured ACL, you need reconstructive surgery, okay, and it was like the moment's dead still and all of the all of the like, emotion and all of the frustration and all of the like. Just, you know, I was completely shocked too because I wanted to believe him right.
Brett Swarts:And so the point of this is too often we look at that family practitioner as the specialist. But when you have a five, ten, fifty, a hundred million dollar exit and they've never done the surgery before and they never heard of it, but when you have a five, 10, 50, $100 million exit and they've never done the surgery before and they never heard of it, you have to. The mistake is relying on their expertise for something they've never done. Okay, now here's the reality. If you bring them to the call with us and we sit down, we have the discussions and we explain the tax law and we walk through the track record and we show them how it works and they sign the NDAs Nine out of 10 join us. In fact, they send us all of their clients and they're thrilled to see that someone has actually figured this out.
Brett Swarts:In fact, the creator of this is a CPA. He is a tax attorney, he's a dual CPA, tax attorney. He's a genius. He figured this out. Okay and Okay. And I'm the, I'm the guide or the person who helps to educate on the front end. I'm kind of like the nurse. Okay, and we work on a conditional basis, and so I say that because the legality piece is really important, but I want to make sure people don't make the mistake of putting too much on their CPA what the specialist CPA and tax attorney can provide.
Brett Swarts:That's the legal part. We also have, you know, national law firms, third-party CPAs, big-time financial advisors they all work with us. We are an all-in-one network. One of them helped build PIMCO from $80 billion to $1.2 trillion. He and his legal team did a two-year due diligence and they're a part of our inner circle. They manage some of the biggest wealth in the world, so their name's a part of it. I mean, we have so many resources for the legal part. Okay, so let's assume that it's legal. That's number one. Any questions on the legal part before we move to the next two objections? No, I think you covered that, brett. Thank you, okay. So the second one is the controls. Right, so I'm third party trustee, right, so you do have to give up some control, right, but you have protections in place. So that's just part of the part of the. I guess you could say the downside. Right, so we've talked about that, but we work together as a team.
Brett Swarts:I really love working with people like john like you, john who are experts in their field and experts in senior housing, multifamily or mobile home park. These are our favorite places to invest. In fact, I personally invest in senior housing and memory care care and independent living as well. I grew up my mom was an LVN and so we would go to convalescent homes and senior housing places where she'd be working, and I was the young kid who came after school and I would, I would talk, I would she'd have me come talk with the people in the in the housing there, right, some of them were, some of them were the actual, like the convalescent homes, right, so, right. So I have a big heart for senior housing, a big heart for real estate, a big heart for serving in a way where you're connecting housing and healthcare in a way, right, and so we really want to be an asset to your team, right, to help you make great real estate investment decisions.
Brett Swarts:In fact, our unique advantage is we consider ourselves real estate investment advisors Like a financial advisor is to your you know, stock bonds, mutual funds although we can hire those for the trust A lot of our entrepreneurial clients, real estate clients. They preferred real estate where they made their money. Now they prefer, at this point, passive real estate, for most of them, right. And so we help to build out these, these plans and these, these allocations, based upon their risk tolerance, based upon their certainty of conviction for different parts of the food group of the commercial real estate world. And so that's part two, that's the controls piece.
Brett Swarts:The last part is fees. Okay, so the fees have to make sense, they have to win for you, the client, and so we work on a recurring fee basis as a trustee, okay, so one of the first fees is that when the funds come into our trusteeship, we get a recurring fee and it's somewhere around one and a half to 2% of that AUM. So for every million, it's about 15 to 20,000 on a yearly basis. Now, this can include a financial advisor, if we have one, right. But no matter how and where you invest the funds, it's about one and a half to 2%. You have some breaks as you go up, you know. So keep that in mind, depending on the dollar volume. So that's the recurring fee for the trustee work.
Brett Swarts:Now we write our notes again at. You know, eight, nine, 10%. We can typically net compounding eight, nine, 10%, net of our fees. Okay, so we cash flow, our fees. So this is a way to really align. We typically can double and triple people's cash on cash return and then free up their time and their energy. The other fee is the one-time legal fee based upon the gross sales price. And so if it was a million dollar exit, it'd be about $15,000, okay On the first million. If it was a two million exit, it $15,000. Okay on the first million. If it was a 2 million exit, it'd be 15,000 on that first million, 1.25 on anything above the million. Our minimum is a million dollar net proceeds, million dollar gain. So these are for larger exits.
Brett Swarts:The last thing I'll say is that we can eliminate the estate tax. So for anyone who's listening and they say, Brett, I have a net worth, I'm married, it's greater than 28 million or 14 million. Single, you have what's called a death tax challenge. Here's the reality. We've been taught that the 1031 exchange is the best because you can swap until you drop and get a stepped up basis. Right, I'm tax-free. Hold on a second. You're not tax-free. Your capital gains tax-free, at least your kids are. But you're not estate tax-free.
Brett Swarts:In fact, if you've seen the show Yellowstone, that's the entire show Kevin Costner has the land and Beth, the daughter's like dad, you got to sell the land. And he's like I'm never going to sell. He's like but if you don't sell that and you die, the debt tax is going to force the sale anyways. And Kevin's like I'm not selling. And so this is the entire premise of the entire show. And so what we say is we go, kevin, kevin, use a DST plus, sell the land and get the whatever it's worth 200 million or a hundred million or a billion dollars out of your taxable estate. And one day before you die, and all of that, now you had to sell the land, you had to sell the property, but now all of that equity is outside the taxable estate.
Brett Swarts:No charity, life insurance or gifting required. This is so powerful, okay, I don't want anyone to miss this, and your legacies, your children, can be the beneficiaries of this trust, and all of the growth between the time we do that sale and the time you pass away is forever outside your taxable estate. This is so huge, okay, because so many people have not done the planning, proper planning, or they have to buy a bunch of life insurance that's really expensive. They have to give it all the way to charity, which there's nothing wrong with that. But most people want to be charitable and it's not, maybe, 100% charitable but even then, like, if they give it to charity, like don't you want your kids perhaps to be a steward of the capital to make sure the charity is doing what you're coming to us? You know, haven Senior Investments to divest that asset.
John Hauber:And it's our job to really bring individuals into the podcast like you, to help them defer those taxes on the sale, defer those taxes on the sale and so. But they're also thinking about their legacy and whether or not it's providing for family, giving generously or reinvesting with purpose. How do you address those emotional feelings of their legacy?
Brett Swarts:Absolutely. We have a podcast too. We have Capital Gains, ax Solutions, and then we did about 200 plus episodes there and we just launched our second one about six months ago called Build it To Billions. So you can give more, all of it away. I listened to your podcast, bro. Thank you, john, it's great, it's awesome. Thank you, yeah, appreciate that.
Brett Swarts:And so we had the really fortunate opportunity to be in rooms with people like David Green from Hobby Lobby, right, who felt, uh, um, not just felt and read about stewardship, but really, like, studied it and started to practice it. And so we say we want to practice a stewardship over ownership mindset. Let me bring this to life for you. Stewardship is like, hey, I've been, you know the Lord is blessed with these gifts, this talent, this wealth, you know all of these things. To be a steward, to be a blessing for others, right, and it's. It's not, it's not in a, it's not best for my nature and not best for me to either hoard or keep or like try to just completely keep ownership of this, right. In fact, we say stewardship over ownership. In fact, we we believe that you know too much of the of just the ownership can lead to what's called entitlement, right, where we want to practice a mindset of stewardship which leads to gratitude, right, and so it's a slight shift and it's actually a massive shift, but it takes a slight shift every single day to say, no, I'm a steward, I'm a steward, I'm a steward. So how David Green has practiced this is he's literally given his billion dollar company away to his children while he's still alive. Okay, this is so big, right, most of that thing, there's like seven and he's, he's one of the seven, right, but he's basically given the ownership away to like six others and they sit on the board and they make decisions together. So, they, this is so big for, for everyone listening here. Now we're going to have be billion dollar companies per se, but, like, how can we be storing the, the not only the, the wealth, the finances, but the wealth of relationships, the wealth of values, the wealth of practicing and building business and enterprise to the next generation so that they can be a blessing and they can compound it? In fact, the sad part about it is about 70%, by the third generation, have lost all of the wealth that the first generation built, maybe from the ground up, and it's, it's, it's, it's a tragedy, right, and so we're really focused on helping our clients, our families that we serve, build what's called family mission vision values.
Brett Swarts:If you don't have your family mission vision values, it's very difficult to aim or need to keep momentum moving towards what the couple or the person who made the wealth in the first generation In fact, it's kind of like the constitution for how and where to steward the wealth, steward the business, and so that's what I would say. If you haven't started Family Mission Vision Values, that is the action to take today. All of the other stuff we're talking about is mostly tactical stuff, okay, but Family Mission Vision Values is so key, so get really clear on those. And then, two, get really clear on what you want and what if you're married, what your spouse wants, what you guys want together for the family. Get very, very clear on that.
Brett Swarts:And then you ask yourself what's in the way, what's stopping us from doing those things, that for our family mission vision values, for being good stewards as well, as you know, for what we really want this stage of life.
Brett Swarts:So what are the obstacles?
Brett Swarts:And then find out if, for example, the deferred sales, trust plus or even the 1.0 version could help you achieve those, uh, you know the the mission help you better achieve your mission, vision, values for your family, for your wealth, and remove the obstacles that's holding you back, you know, would you move forward?
Brett Swarts:And that's basically the conversation we have with all of the potential, uh, folks that we love to serve. Um is is just clarifying what their dreams are, what their goals are, finding out what their obstacles that are in the way and then saying, hey, can our tool be a great fit for you? And if it is, fantastic. If it's not, we'll be the first to say it. But we have found over and over and over again it literally transforms families. They love the flexibility to be an entrepreneur or to be passive or do a little bit of both, and to help them to steward the capital in the next generation by having what's kind of like a we call it a dream team, like kind of like a mini family office that's going to help with this substantial amount of wealth. So stewardship over ownership is the mindset.
John Hauber:Awesome, Brett, I love that and I actually listened to that podcast episode and really enlightening, especially for the individual who built Hobby Lobby. It's great. So what are the first steps that someone would take in regards to reaching out to you or working with you or looking at a DST strategy further?
Brett Swarts:furthe.
Brett Swarts:Yeah, number one, I would say, you know pick up the book right, Building a Capital Gains Tax Exit Plan, and it's my journey from, I guess, from zero to the kind of the knowledge I have now. I have a lot of top secrets in here and we have a lot of our strategic alliances in here as well. In fact, we have Tony Robbins, cpa, who's in here. We have David Young, who helped build PIMCO from 80 billion to 1.2 trillions on inner circle, and we talk about it here. And then it's my journey from Marcus and Millachap to Cheesecake Factory to founder of Capital Gains Tax. So I think you're going to really get a lot of good stuff out of here.
Brett Swarts:Number two if you have a live deal a million dollar net proceeds, million dollar gain I want you to go to . com. com and I want you to schedule a request, a free call, no cost and obligation, an opportunity to meet with one of my team members to see if this could be a good fit, and they'll walk through just some general questions. You know what's the potential sales price of the asset, what's the debt on the asset and what's the basis, and you know what's kind of the tax liability that you're working with there. And then, what are you looking to do with the wealth, post-sale and with their time and your energy and let's see if it could be a good fit. And so that's capitalgainstaxsolutionscom. And then, if you want to follow me on any of my social media and follow my family adventures we just got back from Uganda and Guatemala for some missions trips that we've been on you can go to brettswartzcom and that has my LinkedIn, my Facebook, my Instagram and those kinds of things. So those would be the top places to find us.
Brett Swarts:I'll leave one more. We have the best 1031 exit plan as well. We just released, and that gives the people the ability to try for a 1031, because you might say, hey, I wanna try for 1031. Let's see if it can work out and if it doesn't, you can default into our strategy. Okay, this is really important that you're not stuck in a lane because there's 1031 companies that to just keep you down the 1031 path, but we give you that exit opportunity to go into the deferred sales trust or sometimes we do a little bit of both, okay. So that's called the best 1031 exit plan. You can also find that at capitalgainstaxsolutionscom.
John Hauber:Brett, it has been a pleasure not only getting to know you earlier, but having you on the show. It's very timely that this information is coming to the forefront in the senior housing space. As you know, what's coming up is a huge wave of baby boomers. They're looking to retire, they're looking to sell the businesses that they've built over many, many years and in the senior housing space, we're there to help them and we're here to bring resources such as you to our podcast to educate those that are transitioning into a different life. So thank you so much and hope you have a great day, Brett. Thank you, John.
