Helping Clients Navigate the Deferred Sales Trust with Chad Wold

Chad Wold is a seasoned attorney and legal professional with a focus on law firm growth, succession, and strategic talent acquisition. Gravis Law has been ranked by INC as a result of his efforts and vision. Magazine named us the #1 fastest growing law firm in the United States for the third year in a row. He is in charge of driving growth and innovation by executing and managing key initiatives in strategic planning, growth planning, business development, attorney recruitment, innovation, and technological solutions.

Chad’s 20+ years of experience in the practice of law, legal operations, client development, attorney recruitment, and executive leadership provide him with a unique perspective on methodologies firms can use to better serve both attorneys and clients while meeting business objectives and increasing revenue. He collaborates with other firm leaders and key stakeholders to develop growth strategies and innovative solutions to increase the value of the legal services provided.

Episode Highlights Here:

Chad Wold:

Whether they’re going to sell grandma’s house that they inherited in California, or their primary house in California and capture that equity, and bring it to Montana, how do they preserve as much as that equity as possible or the business that they’re trying to sell?

Brett Swarts:

What would you say is the biggest secret to understanding what is happening with the amount of wealth accumulation and people looking to preserve that wealth? For the circles that you’re running with the clients that you’re serving, what’s the biggest thing that people are trying to capture like what’s happening in Montana? What would you say that is?

Chad Wold:

Well, it’s it goes hand in hand, and what’s happening in Montana, and also nationally you’ve got 10,000, baby boomers turning 65 every single day, and this massive collection of inheritance that’s happening. So regardless of what’s happening in the economy, going up and down, you’re going to have this continued influx of CAP capital into baby boomer Boomers to Millennials, who have cash, and typically that cash will go into certain things like real estate investment. So whether they’re going to sell grandma’s house that they inherited in California, or their primary house in California and capture that equity, and bring it to Montana, how do they preserve as much as that equity as possible or business that they’re trying to sell and vice versa. We have a lot of families that have been here multigenerational in Montana that are looking to sell. They’re sitting on a basis that’s massive, and a farm that their great, great grandfather bought for a donkey and a bottle of whiskey is now worth $20 million. How do you navigate that? How do we avoid or defer some of these tax implications?

Brett Swarts:

Yeah, so let’s focus on the first part of it which is capital gains tax, and then we’ll talk about the estate tax, which I feel like the elephant in the room. So what are they looking at here, Chad, when it comes to the state-federal, approximately, how much tax are these baby boomers, if they’re going to be selling some of these houses in California or other assets in different states? What’s kind of the amount that you think they might face and tax?

Chad Wold:

Well, it depends on which state and what type of asset we’re talking about whether it’s straight, a primary residence, or a business, and there are partners, depending again, with state anywhere between 30, up to high 40s.

Brett Swarts:

You nailed it. The depreciation capturing could push it to 50, as well. There is state federal, and then there’s the Medicare – Obamacare tax that’s been added on for investment property. So depending on what nature it is, and so that’s a big amount. So, if you can exit and defer that. So walk us through the Deferred Sales Trust. For our listeners, or someone who’s watching this with you for the first time. How does it work? What is it and what are some of its benefits for it?

Chad Wold:

Well, in the Deferred Sales Trust, we look at it, typically what happens is the client will come to me and hizzy and say, we were thinking of selling this house where we’ve been in this house for five years, and we bought it for a million dollars, and now it’s worth five, and we can’t walk away from that type of offer. But there’s no other property around here because there’s nothing to, there’s no supply. So then we can’t 1031, what do we do? Do we put it in rental properties. There’s this limiting timeframe that you have on the 1031. That just seems to be the go to for everybody that has that type of money. Typically, whether that’s from their own experience, but or from their financial advisors, or CPAs, they are saying, well, let’s look at the 1031. They never look at the Deferred Sales Trust, because typically they don’t know about it or aren’t educated on it. So on a very high level, if we have a $4 million house, the person instead of having to meet these time restrictions on the 1031, we can put them into a Deferred Sales Trust, which is a third party, which the asset will be put into the third party Trust, which simultaneously will be sold to the buyers. Then installment contract is really what’s going on here. When you break all this down, this is essentially just a seller’s carry back contract, which these types of principles have been around for 30 plus years, and I think the IRC 453 tax code that deals with this has been around for what 90 years or something like that as well.