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[00:01] Over the last two centuries, nearly 90 percent of the world's millionaires have created their wealth through real estate. Here to tell you how you can ride this wave with less risk and less capital while creating greater income, is your host, best selling author and Speaker, Michelle Russell.
[00:21] Hi, this is Michelle, the Master of Money Mindset, and you are listening to the Short Term Rental Revenue Podcast...
and in today's episode, Speaker 2: (00:29)
we're going to finish up our interview with Carolina Alverez and she's going to be telling us about sole proprietorships versus LLCs. She's going to be giving us the big picture on estate planning and protecting your asset, but first I wanted to remind you that our show is brought to you today by audible. You can get your free audio book download by going to audible trial.com forward slash s t r revenue. That's your first book and 30 days free membership into audible where you can try out all their apps, all their stations, all their channels, listen to things like Ted talks and you'll get your first book. There are 180,000 titles to choose from just by going to audible, trial.com forward slash s t r revenue.
Speaker 2: (01:19)
Now we're going to finish up. [inaudible] is interview here. There's a lot of really great information. However, if you've been powering through these, you've already heard her introduction and everything else. You've probably can fast forward a little bit to get through the introduction and the disclaimer, but for everyone else, here's Carolina. So not only is Carolina my friend, my mentor and a business partner, we've been in business as together, but she is an author, speaker, international business attorney. She focuses on work with clients and international businesses, ecommerce, international manufacturing, distribution, marketing, marketing of products and services. I mean she's huge just in the technology and intellectual property realm and real estate investments. Of course, asset protection. So clearly to holds a bachelor's degree from the University of Florida, a master's degree from the University of Texas at Austin, and a juris doctor from the University of Arizona College of law.
Speaker 2: (02:20)
She's amazing. I mean during the past 30 years she's done so much. She's been a faculty member for the American Law Institute, the American Bar Association, distribution and marketing seminars. She's been a faculty instructor in the Maguire Entrepreneurship program at Thunderbird, the American Graduate School of International Management, a faculty member, and the best brilliant ideas business plan contest and author of courses on leading a nonprofit organization, instructor and Co Author of the Rich Dad personal finance courses, which she also co authored for the rich dad company and she's the founder and author and developer of seminars, workshops, educational material coaching programs, recession proof, financial strategies, recession proof investment strategies. She is vice chair of the southern Arizona District Export Council. It's an appointment of the US secretary of commerce and she is past chair of the Arizona World Trade Fair and past chair of the Tucson Metropolitan Chamber of Commerce International Trade Committee. She consults with numerous investors and companies on establishing foreign entities and begging relationships, asset protection residencies, citizenships international distribution channels for products and services, business development, technology and intellectual property protection, real estate and other legal matters.
Speaker 2: (03:52)
And she is frequently a speaker in conferences, seminars, and webinars. So this is my friend, my dear friend and mentor, Caroletta Alverez or the listening audience. This is not legal advice. This program is for education purposes and to kind of give you some ideas and some guidance on how you can proceed, what your options are. But every situation as an individual situation, you know, regardless of what the textbooks tell you, I can tell you from 35 years of experience that every situation is a custom situation in one way or another. So you really do need to seek good help, good legal help, good financial help. Take the information that Michelle and I will give you today and put that in your toolbox and use that as part of your tools so that you will be guided to know where you need to proceed to next and how you need to proceed.
Speaker 2: (04:55)
But this is not a legal solution for whatever your individual problem is. Right? You know, people say, I can't afford to hire an attorney or I can't afford to do this. And my answer is you can't afford not to. Yeah, you really can't. You need to do it. There's some things you need to pay for and it will pay for itself over and over again. And that, that is definitely legal advice. Good legal advice. Like is that I'm like, Ooh, well precede that with good legal advice. So, um, the liability issues for sole proprietor in the single member LLC or just night and day? Yeah, no, just night and day and the insurance covering your liabilities. Okay. So for instance, I think this story kind of deals with that. Remember when, um, well, Carolina, you've known me a long time. So when my daughter who's now in her thirties and Mary, but when she was younger, we moved from Gilbert way out to Gold Canyon, um, Apache out in the middle of the boonies.
Speaker 2: (05:59)
And she was just learning to drive and she would steal the car. Do you remember that? Yes. That she stole the car. Like I can't even remember how many times we woke up in the middle of the night. And I, and here's of course, this is the wife, what a wife says to her husband, your daughter and your car just drove out the driveway down the driveway. And we were so high up on the mountain that we could get, we had a three story house with a widow's walk up there and we would get up on the roof and we could see in the middle of the night coming down to 60 a car coming. We're like a Betcha that's her. And then we would see her turn on mountain view and you're like, Yep, you're comes a car. And then we would see her turn on, you know, ship rock. And we were like, here she comes.
Speaker 2: (06:48)
You know, it's like what is going to happen? But I was working for rich dad at the time, you know, one of the times she got caught, the police officer pulled her over. We were taking, we were taking her to court, you know, go into court with her, you know, the judge was going to hand or whatever he was going to do to her at the time. And I remember Garrett Sutton looking at me and saying, you need to put your cars and an LLC. Absolutely. And I was like, what? And he said, put your cars in an LLC. Do it now. And, and I was like, okay, why? And he goes, it's a transportation LLC, it's going to do this, this, this, and, and he told me, this is what you do. So we did put my car's in the transportation LLC and then when I told him I did, he said, Michelle, I don't, I wasn't trying to scare you.
Speaker 2: (07:40)
I'm glad you did it, but let me just tell you if she had ever been in any kind of accident, it doesn't matter if there was a guy going the wrong way down the freeway, drunk as a skunk, and he hit her, you could've lost everything he said because technically she didn't have a driver's license. She was under age and she didn't belong on the road. So she is automatically at fault and you could have lost everything. And he said, but putting those cars and putting your vehicles in an LLC protected me and my family from this little that any at the time, I mean, obviously you're kind of ticked off, it hit your kid, but you didn't, I did not see the massive consequences that could have. Like, I just, I had no idea until Garrett said this is, this is what could happen. And I was like, oh my God. Oh my God. But it is that, is that what we're talking about when we talk about the liability issues in the insurance? Yeah, you got insurance on your car, but what is it going to cover? It's definitely not going to cover an uninsured under aged minor who should not be in a vehicle anyway. That's right. That's right. Insurance gonna cover that.
Speaker 3: (08:56)
Well, and if you're in a wreck and the car gets demolished or somebody else's car gets demolished and you don't have full comprehensive, which many people do not. I mean, you've got this whole other issue of how in the world are you going to pay for all those damages and you're going to get sued for it. I mean, that's the other thing. That's it. So, you know, when I think about it, I think, wow. I mean, LLCs are amazing for protection purposes. Well, I even had one of the attorneys in Tucson come to me one time. He called me up and he said, I need to ask you about Llcs, because he was not a business attorney, he was a litigator. And he said, I need to ask you about LLCs. And I said, why? What's going on? What's wrong? And he said, well, my wife keeps getting tickets and I'm really worried.
Speaker 3: (09:43)
And I said, okay, well no problem. We'll just put all of your cars in an LLC. The LLC can own the vehicles and you know, your wife is a permitted driver and if she gets a ticket, well it's the LLCs problem. It's not your personal problem. Very true, very true. You know, you always think, oh, I've got insurance, but yeah, but do you have enough? And as you said a little while ago, do you have the right kind? Right. That's, that's really another issue that's important. You know, you need to have enough and you need to have the right kind. Okay. So now when you are protecting your real estate and you've got all these multiple LLCs, how many rentals would you put in an LLC? Like, because everybody always asks, how many should I do? I always, one thing I do know is that I have my holding LLCs and I have my LLCs in which I flip in and never the Twain shall meet, right?
Speaker 3: (10:42)
Because once you flip inside a holding LLC, all of the properties that are within that holding LLC will now be taxed at a different rate at the capital gains rate, which is a flipping right? So it's a higher tax bracket and you've just bought every single property up to a higher tax bracket. So I know to be careful with that. But what I don't know is what is a good number? I mean, what, what's your rule of thumb for the types of properties you put in different LLCs and how many properties you keep in there? Do you keep them in different areas? I mean, what do you suggest? Well, my rule of thumb, there are a couple of issues to look at here. One of which you've already identified and that is the type of property it is holding versus flips them. But you also have rentals for example.
Speaker 3: (11:30)
You know, and for rentals, you need to have other kinds of insurance because you've got uninvited people coming on the property. For example, uninvited guests coming on a rental property. If you're, if you're just looking at rentals, for example, you know, three, four, five and an LLC is probably okay. Okay. If you're looking at apartment complexes are multi dwelling buildings, if it's a really large apartment complex, maybe it's only one. Yeah. You know, our RF, maybe you've got a couple of small eight units. Yeah. Fourplexes or eight unit. Yeah, yeah. Whatever. So maybe you've got a couple in there, but you really need to look at how much money is at risk because if that LLC gets sued, then anything that's in the LLC is at risk. So if those properties are really expensive properties or they have a lot of income attached to them, then you make one a whole fewer of them in a particular LLC and be sure that it's fully insured as opposed to when I was in Iowa, for example, in that partnership in Iowa, we were buying houses.
Speaker 3: (12:44)
And this is typical of, of some of the Midwestern cities, but in the little city where we were, I mean, we were buying houses anywhere from 18,000 up to maybe 50,000 and we would go in and refurbish them a little bit and, and then rent them out. And then eventually we would package them. Oh, okay. And then solid analysis package. Oh, nice. Yeah. Yeah. So, you know, so depending, I mean a bunch of little 18,000 and I don't know that you can buy $18,000 houses anymore, but we would go in and offer cash and for people who wanted to get out of their house and what cash, right? That minute. Yep. You know, and it was just a little two bedrooms, small little Midwestern house. We turned over a whole bunch of those houses. So if you've got, if you've got those kinds of properties and they're not really expensive and you don't have a great deal at risk financially, you can put a number of them in an LLC.
Speaker 3: (13:45)
So you know, I don't know that there, I can't give you a hard and fast number for every single kind of property and Michelle, but I think that if you look at what you've got at risk and how large the properties are and what kind of income you're getting off of them or you know how you're dealing with it, whatever kind it is that that will sort of for you because everybody has a different level that they're comfortable with. Yeah. And you really need to assess what your own personal risk level is. And as you get older, that disc
Speaker 2: (14:20)
level goes down. Good guys. Okay. I'm not willing to work very much longer. I was like, I only got this many years that I want to work. Then I want to be sitting on a beach somewhere. Would Catalina yeah, that's right. What you brought up something really interesting, what you could do, how you package them together. [inaudible] LLC is a really cool thing that we used to do with LLCs was in Houston after I believe it was. So it was one of the hurricanes that came through Houston, wiped out the cities. There were a bunch of people who either didn't have insurance or they just took their insurance check and left and left all these properties and they were, the properties were going up on auctions and the bangs were just selling all these houses that were flood damage and investors were going in and fixing them up and flipping them.
Speaker 2: (15:15)
And the, for some reason, which I don't understand, but the city got all ticked off because how do you can get ticked off at a bunch of investors making the houses look nicer is beyond me. But they were, I think they were just mad that the investors were making the money, that the homeowners were, weren't making the money, but most of the homeowners didn't have the insurance, like I said, or they were just selling out, moving and going. They didn't know how to fix it or maybe whatever reason, they were just loving the properties go. So the, the city of Houston came in and said, okay, no longer, um, can you flip a property? You have to hold it for a minimum of one year and you know, you can't just sell it. Well that was an easy fix with an LLC. We just put the properties in an LLC.
Speaker 2: (16:00)
We bought each of the houses in an LLC creating an LLC for every single house. And we didn't sell the house. We sold the Llcs, who's as it happened to be in a house. But the thing is LLCs are amazing because you can package things together. And I think it goes without saying that like things should be held in there too. I like that idea and that's, and that's a great strategy and it's a great strategy. I mean, and that sometimes that even has some tax advantages to do it that way. So you know, another opportunity. Yep. All right, so now let's looking at the big picture. Okay. Oh yes. This is something that I think most people don't do, which is why we're going to talk about it. Exactly. You know, you think you have your, um, your retirement all set and you, you had created this plan and you work the plan.
Speaker 2: (16:54)
And after all this time and energy, you're like, oh, plans working, I'm getting older and I'm going to be able to retire. And then something comes that you didn't plan on. Right. Rubs the plan and you're like, that wasn't in my plan. But estate planning, Tj, our youngest just turned 18 he's working at chick filet and he's making like 1350 an hour. Right? And so he can't be 18 in my shell. I know, isn't it sad and scary? He turned 18 and we are just like, they tell her like, I remember that kid when he was just Yay tall. I can't believe you said. And it's funny, he started college at 15 so he's been, he's, he's our little, he's our little guy. But the coolest thing about Tj is he's, I had to have five kids before I had one that actually listened to me when he started working, I him down and I said, let me just explain something to you about earned income.
Speaker 2: (17:54)
This is the income that you can put into your Ira. And let me explain why. And, and then I showed him, you know that Dave Ramsey example where the young man put, um, I think it was 2000 every year for just six years, no, eight years until he was 26 into his ira invested is 6% and at the end when he was 65, he never did anymore. 2000 for eight years, a total of 16,000 he invested from the time he turned 18 to 26 and then by the time he retired at 65, he had well over 2.2 million or something. Right? Yeah. And, and that's just the power of accrued interest where his brother did not start putting into his IRA until he was 26 so his brothers started putting in 2000 every year at 26 any did. So every single year all the way until he was 65.
Speaker 2: (18:57)
So you're talking 30, you know, like odd years putting money into an account or more. Is that 40 years? It's 33 yeah, it's closer to 42,000 all that money, any never caught up with him. He only had 65. He only had 1.4 million or something like that. He never could catch up. So the power of time and accrued interest when is, you know, I give you that story and then I, you know, I told him when's the best time to invest in your retirement? The best time was when you turned 18 the second best time is now as soon as possible. Uh, Steve Planning, most people don't want to think about this, especially younger people. And it's not just because I'm over 50
Speaker 3: (19:47)
well, you know, that's the whole issue because all of us, and I don't think there are any exceptions, maybe a very few. We all think we're invulnerable and we're going to live forever. We're just caught up in whatever our day to day thing is, like a subject where we're into doing what we're doing. And so we're really not thinking about formulating some kind of an estate plan. An investor couple that I know here in Arizona, they've got four children and they do a lot of investing in real estate. They wanted to invest in something that I was doing some fundraising for. And as we were sitting there, and I'm going through all of the private placement documents with them and I'm asking them questions, well, you know, how are you holding your properties? I mean, are they held as a joint tenancy or are you holding them as community property?
Speaker 3: (20:44)
You know, blah, blah, blah. I mean, I have a little list of questions I always ask. And Lo and behold, I come to find out that they've got all these rental properties. They don't have any of them in LLCs. They're all in their own personal names and, and they've got four children. And I looked at them and I said, could I please refer you to an estate planning attorney because I'm scared to death to think what could happen to you guys? Oh my gosh. Because you have done no preparation. You know, I mean, he's a professional. He's making a lot of money. His wife is kind of the property manager for all of these properties. Oh my gosh. But that's the reason we need to think about estate planning and we need to plan how we do our investing. We need to plan how we want to pass that along to our kids if we have children or to family members or to significant others, whoever it is that's important in your life, right?
Speaker 3: (21:48)
You need to think about those things and you need to prepare. Just grows. People don't even have wills. I forget what the average age, I saw it on a show and I was like flabbergasted because if you don't have a will and you've got children, you're state gets to decide where your children go. You just don't leave that up to chance. No, you really don't. You absolutely have to have a will and if you have enough assets then probably inside that will you want to set up a trust. Certainly you want to set up a living trust so that you can avoid probate, at least for your partner. You know, if you're married then it can automatically, you're, you're part of the living trust can automatically go to your partner without going through probate. But set up a trust for your kids, you know, make, make some provisions.
Speaker 3: (22:40)
Will you have to pay a an estate planning attorney? Yes. It's not going to cost you an arm and a leg, however, and it will be the best money you've ever spent. And you can go to sleep at night, not having to worry about what if I don't wake up in the morning and what happens to my family and what happens to all of my assets? I mean, the worst thing in the world, and believe me, I've been involved in it personally and I've been involved in it with clients. The absolute worst fight in the world. Bar none is a family fight over who gets what. Isn't it awful? I've lost both my parents, actually three of my parents, if you think about it, because I had my stepdad and I was executor on his will and on my father's will and, and when my mom died, I mean it does, it turns into a, I mean, you just can't even believe what happens when someone dies. No, the worst of the worst of the human condition comes out in people. It really, really does. And I always tell people too,
Speaker 2: (23:46)
I don't care if you have three kids or four kids, you have one executor, worry about protecting your assets because you get one person who doesn't agree with somebody else. And they forced everybody into some situation that they don't want. Absolutely. And I'm like, I don't care if you have four kids, there's one executor, you know, it is just, it is so important. I mean, I got sued
Speaker 3: (24:08)
four times, four times, four times. I had four lawsuits pending against me because somebody on the other side of the family didn't agree with something. Oh my gosh. So, I mean is save yourself a lot of grief and for Heaven Sakes, Save, save your family from the grief and the, and the heartache that that will put you through and the expense. Yeah. I mean it costs me almost a hundred thousand dollars to fight for lawsuits. Wow. So, you know, it's just not worth it. If you've got assets and you know that you want to do certain things, you know, sit down now talk to your family about it. I mean, involve them in the conversations. It will pay dividends in the long run because you'll get to have it the way you want it. You can set up title now and certain ways on certain things so that things don't go through probate. So you don't have to worry about that. It's just, it's so much more beneficial and it's so much easier.
Speaker 2: (25:13)
And it means exactly, because it does make everything easier because just one person, there's no arguments. You know, some people might have hurt feelings, but everybody's hurt because they're going through the same thing when there's a death in the family. But yeah, when there's one person in charge, there can be no arguments. That person's in charge and everybody else, even the strongest personalities back up and go, there's nothing I can do so and so is in charge. So you know, it makes it, you know, they think it's gonna hurt feelings. It doesn't, everybody's already hurting because they lost the person they love. And then all the vultures are there going great [inaudible] on this. Yeah. Yeah, because I mean how many times, how many times have you seen, and I'm sure especially as an attorney, Carolina, where you have five kids or four kids or even three kids splitting a house and you'll have two of them love the house and they want to keep it.
Speaker 2: (26:11)
And one is like, we're selling it. I want my money, I want it now. And they, they forced them into doing something that the other two don't want because they can't, they don't have the money to pay off the other, you know, sibling. It's just, they're just holding out for greed. That the one, when you're, I mean, it's just such a sad situation. You just want to tell people, look, avoid that and, and protect the asset first. And then when you do, then get, you know, just one. And if you don't want to hurt somebody scaling, get an attorney. Because if you, if you really
Speaker 3: (26:44)
feel like, oh, I don't want to hurt any of my kids, then call an attorney and say, look, you handle it. I'm going to put you in charge of this when this happens. And that way my, none of my kids can argue with it. So yeah, that's very true, Michelle. Very true. And keep in mind too that every state law is different. So depending on the state that you live in, because Michelle, I know you've got people from all over everywhere listening to your podcast, so be sure that you check with an attorney about what your state law is and what the tax laws are there. Some states still have a state taxes. Many states now have gotten done away with the state taxes, which is a blessing because it used to be that you would get double taxed on a states. There would be an estate tax for the state wherever you lived, and then the federal estate tax.
Speaker 3: (27:37)
So be sure that you understand what, what your laws are in the state, where you're living, that will help you in your planning process and it will also help you to get to an attorney who can show you exactly how to minimize all of those taxing issues because you can set your well up in a certain way. You can set up trust in a certain way so that those taxing issues can be minimized and you want to do that to the extent that the law will allow it. Now what if you're in in Panama or something or Kelly at are we move over to let's say Puerto Rico or something? Well, you're going to have different laws over there. Very different laws, you know, and that's another thing. One of my clients lives in Belize with the exception of her son who also lives in bullies.
Speaker 3: (28:26)
All of her other children live in the United States. So we had to do one, we'll for the United States because she owns some property. She's got some investments in the u s and then she's also got investments in Belize and owns property there. So we had to do a separate, we'll for Belize because Belize has a whole different system. Okay. Oh Wow. They don't have the English Panama's everything is in Spanish. Well, and you think that just because they speak a certain language, you know, which may be similar, does not have a thing to do with what their losses. Right. So, and, and that's true from one state to another. You want to be sure that, and if you move from one state to another in the u s then take your will to, uh, an an estate and trust attorney and the new state where you've just moved to and have them check it out. Just to be sure that it complies with where your local law is at that point in time. You know? And if they need to make some minor adjustments, they're not going to change everything. They're not going to tell you that they have to Redo the whole will, but if they have to make some adjustments to make it in compliance with that local state law,
Speaker 2: (29:43)
you know, then you can take care of it right away. But yeah, if you're in a different country, totally different laws, totally different probate. Totally, totally different. Everything. And what you said too before, I think it is important to touch on real quick is that, okay, so you said you needed an estate, an attorney to help you plan your estate. There's also attorneys that are tax attorneys that can help you with your taxes and so that you can literally plan how you're holding companies and and how you're holding your properties to help you get the best tax advantages. But there's also attorneys in other countries because when you're, when you are traveling and retiring in other countries, you're paying double taxes. You really need to get attorneys. You can't have a one size fits all attorney. That's generally true. I mean a lot of us have a lot of different areas that we practice in, but we cannot be experts.
Speaker 2: (30:44)
And all of that, it's physically impossible to do. Right. And you really need to, I mean, if you have a really burdened, some tax issue, you absolutely should be going to a tax attorney to have that taken care of because they're experts at what they do. But every foreign country has their different laws, everything. So, oh yeah. Cause we talked about this for a second. So can a trust own an LLC? Oh yes. Absolutely. Okay. Yeah. They can trust, can own a corporation. You can put a partnership inside of a trust. Um, yeah. In fact, that's one way to build layers of protection. Nice. And that's, and when we talk about international, when we do one on that, that's one of the strategies for, um, holding international assets to Wa. Like we touched on that too before about the probate, avoiding probate with trusts and probate.
Speaker 2: (31:40)
I think that was the hardest thing. Cause I don't think Arizona laws of the same as Iowa. But boy, I'll tell you, Iowa text my, when my parents were lived in Iowa, when they pass and they have a terrible probate, I mean it's, they tax everything. Yeah, crazy. And you just feel sorry for these people because you know, you're like, wow, I can't believe your state does that to you. And makes people go through all that pain after the fact, after they lost somebody anyway. So you really want to understand what probate is. So you want those wills, you want those trusts, you want those entities that are going to protect your assets so that you can just hand them off to the next generation were something were to happen to you or who you love and admire, who you want to pass them off to. And that that applies to personal property as well as as um, larger assets. I mean if you've got, you know, like one of my dear friends, her mother is a
Speaker 3: (32:40)
cut glass while she's actually an expert on cut Blass on crystal and her house is filled with it. I mean she's got all kinds of collections. She's got art work that's very expensive. Nice. You know you want to go through, if you've got stuff that you want certain people to have, you need to either write a list down and make that a codicil to your, well [inaudible], O, d I c I l to your will, which means it's an attachment to your will and you list out who you are, what you've, you know, what personal property you have and who you want to have it. Or you take a video camera and you go through the house and you look at, you know, your video, each piece or whatever it is, and you talk about it and you and you say, okay, and I want so and so to have this, this, my intention is that this piece, this lovely piece, whatever it is, glass and that's, that's what it is. Our piece of art work or you know, a family heirloom that you've inherited from your great grandmother, but make sure that you identify it in some way so that there's no argument about who gets the personal property in addition to other types of property. Yeah, that's true. A lot of times we only worry about the big stuff, Huh? Yeah, we do. We do. But you know, there are more family arguments over great-grandmothers frying pan in the kitchen.
Speaker 3: (34:10)
I think my mom, it was the, the um, grandfather clock. Yeah. There's, we're arguing about who got the grandfather clock yet, you know, or precious metals or Bitcoin at rings. No currencies. I mean, and, and the other thing is everything now requires a password. You can't get into anything without a password, which include your paypal account and you're out in your linkedin account. I mean, it doesn't make any difference. And if you don't have all of that written down and put somewhere, or at least let somebody know where that list is, they won't be able to access it. Yeah. If you've got pictures on, on your phone and it's locked, oh, well, Yep. That's it. Nobody's getting it. Nobody's getting it. Yeah. So, you know, there's a lot to think about these days because the world is far more complicated than it was when the definitely growing up.
Speaker 3: (35:14)
So, you know, you've got to, you've got to be mindful of all of this. And yes, it will take you a little bit of thought and a little bit of time to organize it, but you've got to make a plan to do it. Yeah, we should have something about this security too because um, it changes all the time. As soon as people figure out a new technology feed spill, they figure out a new way to steal, you know, something. But yeah, we can avoid probate with, um, the trust. And let's see, I think the last thing we were going to talk about was the USA reporting requirements for the ownership of, you know, your foreign real estate. Every time you do taxes they're asking about foreign accounts and foreign real estate that you're holding. And who started that man? Cause they never used to. And now it's crazy came, it came in with, um, with all the new FATCA regulations, which went into effect in 20, either 2014 or 2015.
Speaker 3: (36:13)
They kept moving the dates. I think it might've been 2014. Wow. Yeah. It all has to do with the new FATCA regulations, the foreign account transaction, tax law, a tax act. But basically if you hold foreign real estate, if you have bought a condo in Panama or a condo in Belize, and it's in your personal name or Condo in any foreign country or a house in any foreign country, as long as it's in your personal name, you do not have to report it. What? Yeah. Yeah. Now I'm not talking about rental property. I'm talking about a piece of property, a house, a house, a house, or a Condo, or real, some type of real estate. If you own it in your personal name. And it depends on whether you're filling it out on the form. Oh. Unlike a, okay. On the, uh, whether it's the 89.
Speaker 3: (37:10)
Okay. Because there, there are two different forms that you fill out for international. So it depends on which form you're filling out. If it's Fatca, if you're filling out the F bar, which you have to do online, then it's gonna ask you certain questions about that. But for Fatca purposes, if you own it in your own name, it's not, it's not income property, you're not getting income off of it. It's just a house that you know it's a vacation house or something that you and your family, you don't have to report that. However, if you decide to put that house in an LLC and a foreign LLC, then you have to report the foreign LLC. Huh. And you have to report the value of that foreign LLC. If it holds an asset, then you, you don't have to tell them what the asset is necessarily, but you do have to tell them what the value of the LLC is.
Speaker 3: (38:08)
So you do have to report the LLC. If you've got a rental property in an LLC, offshore rental property in an LLC that's getting income, then you have to report the income from the LLC, from the foreign LLC because that's taxable to you as income in the u s oh wow. So it really depends on how you're holding property. Just like if you have precious metals, if you have precious metals and a storage unit that's only in your name, maybe it's in Singapore, wherever it is, but it's, it's a discrete storage box and it's in your personal name and you whatever is in that box, you don't have to report that. Oh Wow.
Speaker 3: (39:04)
If it's unallocated, if it's in one of those storage places where they hold a lot of precious metals, gold or silver or whatever it is, but it's unallocated. In other words, it's not in a discreet box with your name on it. It's just mixed in with a lot of other precious metals from other people. Then you do have to report that. So I mean there are all these different kinds of roles and we won't go through all of them today. But again, it just goes back to asking the right questions. I mean, there's no problem with doing these things. There's not any problem whatsoever. And owning foreign real estate that's perfectly legal, but whether it's reportable or not and how it's reported depends on how you're holding it, whether it's in your name or in a in a legal entity and off shore legal entity.
Speaker 3: (40:00)
I mean there are other questions that you need to ask so we can talk about that more in depth. Yeah. When we do our foreign one, when we do our foreign one and I'll go through the F bar and I'll go the 89 38 the form 89 38 which are the forms that you need to fill out their forms called 54 71 that you have to file if you've got offshore LLCs for example in that kind of thing. So we'll talk about those at a different time. But just keep in mind that you need to be smart about how you're doing it and and knowledgeable. Well, I've kept you out late. I, it's past my bedtime.
Speaker 3: (40:43)
I'm like, I even kept you out of the young lady. You're mom's going to be real mad at me. She's going to be mad at you, Jose, that Michelle she is, you know, an instigator of chaos. Look, that's right. That's literally what my, my kindergarten teacher wrote on my report card at the end of the year. Michelle is an instigator of chaos. I love it. I'm going to remember that Michelle, my mom used to say it to me all the time and she goes, you know your kindergarten teachers write about you. When I saw it once, I was like, Dang, that's crazy. I wonder if she meant it in a kid. Organized chaos. Michelle
Speaker 2: (41:34)
organized chaos. Organized gas. Exactly. That's it. Well, I do appreciate you doing this all over again, Carolina. It's been my pleasure. It's been my pleasure. I apologize a hundred times over for for the first one and this time, I mean, every three seconds I look and just make sure I keep seeing the light going, recording, recording. I'm like, please God, please God please God. But I want to thank you again and honestly, I mean your, your what you offer me as as a friend what you have given to me and it's just invaluable. I can never put a dollar amount on the, on the money that you've saved me in the time and the, you know, just everything that you teach me. It's just I feel sometimes that it's a one sided friendship that I can't do enough for you because honestly, you've given me so much and you and you continue to do so.
Speaker 2: (42:33)
And I, I love you so much. I really, really love you. Bullied me, Michelle. You do. You do plenty for me. I'm going to be an indentured servant Tuf and here at all, but I appreciate you being with us and thanks so much for all your time and thanks for letting me keep you out late. Oh, it's been fun. I hope that the people who listen have as much fun as you and I've had putting it together so it totally is. All right. Well I can't wait til the next time too because investing overseas is definitely like one thing that I want to get way into. The closer I get towards my retirement because I'm like, okay, I'm strategically planning on a map where I want these location. I'm like, okay, this one looks good. This one looks good. I'm thinking grease to at least one in Greece because I've had a friend who keeps going there and the picture she brings back are amazing.
Speaker 2: (43:29)
I'm like, all right. Maybe Greece, maybe something in Greece. It looks gorgeous there. Plus it is gorgeous there. I mean, as long as you don't put any money in the bank there, I think you'll be okay. Yeah, digital it in property. Either Greece or Cyprus. You don't want to put money either place, I don't think. But yeah, living there would be wonderful. Amazing, right? How gorgeous these places are. Plus I saw Mama Mia too, and I was like, Dang. Oh, where was this filmed? It's gorgeous. Yeah, I know. I know. Well, I'm going to sign up for this show. Okay. Thanks you guys, and we'll talk to you next week. Have a great day. Thanks for listening. God bless you. Go and grow.
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