Matching Your Financial Resources To Your Family Goals with Rocco Carriero

Rocco A. Carriero is a comprehensive Wealth Advisor specializing in working with Business Owners, CEO and Entrepreneurs. He is a Chartered Retirement Planning Counselor, Accredited Portfolio Manager Advisor and holds an MBA in Banking & Finance with over 20 years of experience. Rocco has appeared on Fox, NBC and his financial insights have been featured in publications including the Wall Street Journal, Forbes, Fortune, Wealth Management Magazine as well as many other local and regional publications.

Rocco is a member of the Columbus Citizens Foundation and has served on the board of directors of The American Heart Association, Southampton Business Alliance, East End Hospice, and Westhampton Beach Performing Arts Center and serves as the Vice President of Integrated Medical Foundation. Rocco lives and works on Eastern Long Island, NY with his wife Heather and their two children Ella and Luca.

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Matching Your Financial Resources To Your Family Goals with Rocco Carriero

Brett:

I am excited about our next guest. He is out of the great state of New York and he is focused on helping you to create a comprehensive wealth plan. He specializes in working with business owners, CEOs and Entrepreneurs. He’s a chartered retirement planning account counsellor accredited Portfolio Manager advisor and holds an MBA in banking and finance with 20 years of experience. He has appeared on Fox, NBC and his financial insights have been featured in publications including the Wall Street Journal, Forbes, Fortune, Wealth Management Magazine, and many others so much more. Please welcome the show with me, Rocco Carriero. Rocco, how’re you doing, Sir?

Rocco:

I’m doing fantastic. Thank you for having me on your show.

Brett:

Absolutely excited to dive in to learn a little bit about matching your financial resources, your family goals, we’re also going to talk a little bit about the look at Capital Gains Tax tail wag the dog will also touch on that. But before we go there Rocco, would you give our listeners a little bit more about your story and your current focus?

Rocco:

Well, give everybody kind of a perspective. Well, I’ve been in the wealth management business working with successful entrepreneurs for probably close to 25 years now. The people that we’ve been working with, which are business owners, there’s three areas of their life which are really important. It’s their businesses, their themselves as an individual, and of course, their families. That ties in with the book that I had written that takes a look at, takes a look at all three areas of other business owners life. We specialize in helping business owners get from point A to point B by using our Three Cords Approach. I’m excited to be here to talk with you on the two topics that you had mentioned.

Brett:

Before we go in there, go to their Rocco, I want to go back one step and help our listeners and myself get to know you a little bit better. I believe we’ve all been given certain gifts in this life to be a blessing and help to others. Some people call them strengths. Some people call them superpowers. But I’m curious, what are those one or two gifts that you believe you were given? How does that help how you help and bless people today?

Rocco:

I would say the is my ability to listen, I’m a really good listener, and I’m able to kind of put myself into the shoes of the people with the challenge they may have and then be able to provide them with solutions. Listening certainly is one of the special gifts that I’ve been blessed with, and the other area that I’ve been blessed with is being able to align, being able to understand through who’s that can make the house happen. It is able to see the person shares an issue or challenge, I’m able to find them a resource to help them solve the problem. I would say that those are the two.

Brett:

Let’s dive right into the show for today, and it’s matching your financial resources to your family goals. Rocco, what’s the number one secret to doing just that?

Rocco:

The number one secret is identifying and creating a financial plan. Knowing what’s really important to yourself, as from a financial standpoint, so step one, and probably the most important thing is the commitment to develop a strategic financial plan.

Brett:

By commitment, break that down, because that can be interpreted in a couple of different ways. But what are the more successful clients that you work with? What is it about their commitment? What does that look like and step by step action?

Rocco:

I started using the word commitment a few years back because I saw the difference between the people that were really committed to doing planning on an ongoing basis, and the people that kind of liked the idea of it but weren’t really committed to it, and the people that were committed to it did significantly better than the ones that kind of had one foot in one foot out, where, that we’re really clear on their overall plans, and so people that are saying, everybody’s thinking, I have a financial plan, or I’d like to do a financial plan. But the people that say they’re going to do it, show up to the meetings, do what’s required of them. There must do those who are the ones that really knock the ball out of the park.

Brett:

What’s the biggest false belief for those who are not maybe not as committed as they should be? What’s the one thing you’re gonna help them overcome?

Rocco:

That they haven’t done everything as good as they thought they have. We’ve sat with lots of people that said, I’ve done everything the way I should do it. I know how I’m all laid out. I know how I’m out. allocated, I’ve done a great job, everything is fine, and once you start peeling back the onion many times, they’ve missed many parts of the most important areas, the financial plan. Even a simple thing, I have a little story to tell you, I’m not sure if we have time to kind of discuss it. But even things as simple as beneficiary updates, there was a case that I heard of where a guy, in his early 20s, got a job working, I think, at General Electric, gets married to his high school sweetheart sets up his pension accounts and things like that signs off on his beneficiary to his wife, a year later. The guy has a great career at GE, and a year later, his marriage didn’t work out with his high school sweetheart moves on 10 years later, he gets remarried.

40 years later, he retires from GE passes away, suddenly, unfortunately, right after he retires. As the company sent in all of their documents to get the pension payouts, what ended up happening was that because the guy never changed his beneficiary from his first wife from 40 years ago, his first wife, they called the first wife and said, obviously, there was a misunderstanding here. They thought it was a big joke like, obviously, the person is going to understand, and it happened to be over $4 million worth of securities and assets, and she said, well, listen, the second wife, I was the first wife, he wanted me to have it, obviously, because he had 40 years to change it, and he never did. That some of the things that able a beneficiary are in line needs, you need to look at all these different things, and you need to look at them on an ongoing basis because anything could happen.

Brett:

What a story. That would be a challenging phone call to receive for sure. For the second wife, for the first wife, it might be like winning the lottery. Really interesting. Beneficiary updates to something as simple as just making sure that you’re staying organized, and perhaps even funding your living trust for probate stuff, you’re actually taking the assets. Just because you form a Living Trust doesn’t mean it’s anything’s gonna pass properly, you got to make sure you properly fund that.

Rocco:

We see that a lot where people do an amazing job of meeting with estate planning attorneys creating all these wonderful documents, but it is not the law firms responsibility to make sure that those trusts get funded. Many times people think, great. I did the documents, I got the documents in hand and everything will follow the path of the documents. But if you don’t work with your financial institution to make sure that you’re these trusts get funded. The titling of these different accounts get changed to your trust, then they will not be implemented and it will and it will follow whether you had a TOD (Transfer-On-Death) or whatever else transfer on death or whatever other direction that tied in that account.

Brett:

It’s a commitment to actually seeing through what needs to be done and looking at an ongoing basis. Is that a fair summary so far, Rocco?

Rocco:

The ongoing basis is critical. Every we’d like to tell people every three to five years, he got to go back through all these different things. We look at people’s beneficiaries on an annual basis. But we tell you, we got to review your estate planning documents, you got to review these things every three to five years just to make sure that everything’s in line with what you think the way it should go.

Brett:

By the way, you can learn more about Rocco Carriero at ROCCOACARRIERO.com. That’s really great. Now let’s connect to the family. Because we’re talking about matching your financial resources to your family goals. I mean, obviously, part of the family goal is to pass on your financial legacy. Not in probate, not through probate court, but in a way that’s through a living trust.it gets seamlessly you can save some there and your finances actually go your wealth goes to where you want it to go. That’d be part of your family goals. But maybe you can touch on maybe some more than nuances when it comes to matching your resources to your family goals.

Rocco:

Having family meetings, talking about these different things, really important understanding, being very clear as to the way and the way you would like your assets to flow. Super important. Because I can tell you if you don’t have a plan, somebody else is going to create their own plan with your assets, and most of the people that we work with, work really hard to accumulate large sums of dollars. They would like to see their families utilize the resources in a responsible way, and there’s no way for your family to really know what your true wishes are unless you tell them and you could tell them verbally you could document that on paper. It is because a lot of times family I kind of wonder and says. How would mom or dad or grandma or grandpa, whoever, how would they want me to actually handle the resources? If they don’t know that they’re just going to do whatever they think is right, and sometimes that’s the right decision. But many times it’s not in line with what the asset accumulator would have wanted.

Brett:

It’s actually just, what’s you say, having a big family business meeting? In a sense. We’re talking about assets, things that maybe are sensitive things that can be challenging, I can imagine some people and folks don’t want to have to deal with the stress or want to deal with those tough conversations. But it’s, it’s being, I guess, mature enough and committed enough right to have these difficult, crucial conversations. That no one’s caught off guard, is that a fair summary?

Rocco:

It is a fair summary, and it is a very uncomfortable conversation, but you can utilize the work with a third party person. Whether it’s your financial advisor, your accountant, your attorney, a trusted professional, that the rest of the family trusts as well, to facilitate the meeting to have the conversation. Those work the best, in my experience.

Brett:

That’s probably something that you do right for your plans.

Rocco:

Those are some of the best meetings, where we get the family at the table, and the work that’s done at those meetings is really life-changing for many of these families.

Brett:

That’s such a good service, and it’s connecting your good listening skills, as well as understanding the who’s right, and the dots and connecting everyone together, and it’s part of understanding what it means for the family legacy, what it means for everyone else who’s maybe inheriting different things. I just started watching the show succession, and my buddy from New York, we were just in New York, months ago for a trip, and he said, check out this show, and it’s interesting, and it’s something that we all should be thinking about. Because, that’s part of being a good steward with the wealth that we’ve accumulated and earned to be able to pass it on well, excellent. Anything else about matching your financial resources to your family goals, besides obviously, making sure you’re committed to annual reviews and planning, and ongoing setting up your beneficiaries correctly, and second, making sure you’re communicating with the family, anything else that you would add to matching it to your family goals?

Rocco:

I would say, one of the good things and being a good steward of wealth is, a lot of times we talk with clients, and they have this idea of doing philanthropic type work or giving some dollars away, but they just don’t know where to go, and so really thinking about are there groups and organizations that you’d like to help that you’d like to make a difference in, while whether you’re while you’re still alive or after you pass away, is another really important area, in doing it from a family standpoint, is, is really great as well, you can get the whole family involved if you want, or you can just do it yourself. But another thing that it’s another thing that I’ve really seen add a tremendous amount of value and enjoyment to people’s life is, is where they kind of work on this where they think about a part of their investments, part of their assets, going to different causes to help make a difference while they’re alive or after they’ve gone.

Brett:

Absolutely love that part of it as well. The bigger purpose and giving back to causes that your clients believe in. It’s fantastic. Now let’s shift a little bit to the capital gains tax part of this show where we’re talking strategies, tax deferral, and let’s start with the part of the topic at hand don’t let the cap gains tax tail wag the investment dog. Rocco, what does that mean? Can you give us a maybe a sample and then maybe some strategy behind how you help your clients make a good decision on that?

Rocco:

Making decisions purely because of a capital gains tax increase is, in my experience has never been the right decision for assets that are likely to continue to appreciate over time, so I’m making the decision because there’s an extra 3% capital gains tax on there say, we need to sell would do something different, because we need to sell that the asset the family jewel, or the stock we’ve had or land we’ve had in the family for a long time because capital gains are going to go up by 3%, and that’s going to equate to another X amount of dollars, and I can tell you a story about it. There’s a family that we work with it. They’re large landowners here in the Hamptons. When we had the additional I think it was the Affordable Care Act that the additional 3.8% got added on back in. I think it was 2011 Was it or did I forget the year.

The family that we work with has, something like $10 million worth of land and they rush to make a decision to sell the land to avoid the additional, on 10 million It was like an additional $380,000 More they were going to have to pay in tax. They thought they were making a genius decision by saving $380,000 of additional taxes that if they sold now that they would have to pay later when they sold the land. Well, PS fast forward here, 10, 11 years, that $10 million plot of land is now worth probably 25 million. Focusing on the tax piece, and making the decision to sell now with the long term asset just to avoid some additional taxes is not always the best decision with certain assets. That does that. Does that help give listeners a kind of an idea when looking at it really?

Brett:

It really does, and it makes me think about the biggest frustration with the 1031 Exchange, and Capital Gains Tax Deferral for a lot of our clients who are an investment, real estate, and overpaying for properties, and that’s what happened in 2008. They love being a seller, they hated being a buyer, but they felt like they had to make the decision to purchase because of the 30 to 50% in cap gains tax and depreciation recapture, and so they rolled and rolled and rolled music stopped and some people lost half and often we will have to crawl the way out over the next five years. Because they had too much debt, not not the Quiddity not enough diversification and we found a solution to that. It’s called the Deferred Sales Trust. That’s unique about it as you can sell high, and then you can diversify into stocks, bonds, mutual funds, you can put it back into passive-active real estate. You can do hard money lending you can start a business with it all tax-deferred without having to take on debt without having to do any rush shotgun weddings. We call it the 45-day engagement, 180-day wedding because that’s what the 1031s time restrictions have. Where’s the Deferred Sales Trust has none of that? I’m curious Rocco, have you ever heard of that before? Any thoughts on being able to sell and diversify at these high prices?

Rocco:

I really like this strategy that you’re talking about there. I’m not familiar with it. I haven’t I’ve obviously I’ve heard of 1031 exchanges, I’ve heard of Opportunity Zones. But the actual trust itself, I’d love to learn more about myself. Just for clarification, say somebody selling a company for $30 million, pretty much all going to be zero cost basis, they’ve had the company for 50 years, they’re able to sell the company then put money into this trust, and then not pay the taxes or just basically, obviously pay to just defer the taxes for down the road is that we’re saying?

Brett:

Exactly what I’m saying is precisely and so we actually just did a business sale for an owner out of Alabama, he sold a $2.6 million business and he had two partners who wanted to buy him out, and he had zero bases, and so it wasn’t eligible for 1031 Exchange, first of all, and he wasn’t ready and willing and able to get you really, really want to give it to all the way to charity. He will he’s the Deferred Sales Trust, we like to say it’s like the CRT (Charitable Remainder Trusts) except for no C, as required. He parked it into the Deferred Sales Trust, and then he is used some of the funds to partner with him on a deal to build 70 multifamily units in Tennessee all tax-deferred. Now some of the funds or stocks, bonds, mutual funds, some of it can be insurance, we like to just help the client with the financial advisors that we work with my role as a trustee. We work with financial advisors like either Rocco across the US, based upon their risk tolerance, a wealth plan, but it’s a tax-deferred wealth plan, and it can solve a lot of challenges. But you’re right for the gentleman who’s selling a $30 million asset.

They’re looking not only at a capital gains tax, but they’re also looking at state tax challenges, and so we’re also able to use the Deferred Sales Trust. It’s called 2.0. DST to move it outside the taxable state, and that’s powerful too because the growth of that is also outside the taxable estate. It’s been going on for 25 years. I wish I would have learned about it earlier than 2009. Unfortunately, I was at Marcus & Millichap and in 06, 07, 08 I didn’t know about it and people were doing 1031 exchanges in overpaying. We wish we would have known but now we know we try to teach everybody by the way if you’re listening for the first time you can go to capital gains tax solutions.com to learn more and get our free ebook. We also have a mastermind that happens every Friday we just closed our first cryptocurrency deal about 60 days ago and close to those cents, and we’re talking all things Deferred Sales Trust cryptocurrency tax deferral and ways to grow your wealth but yeah, that’s how it works Rocco. It’s pretty cool. We’re pretty excited about it, and but any thoughts on that?

Rocco:

I want to learn more. I actually like to learn more. I’d love to want to understand this a little bit better and see how now I assume that these have been IRS tested in the trenches and all that, is that correct?

Matching Your Financial Resources To Your Family Goals: “The number one secret is identifying and creating a financial plan. Knowing what’s really important to yourself, as from a financial standpoint, so step one, and probably the most important thing is the commitment to develop a strategic financial plan.” – Rocco Carriero

Brett:

It’s been over a dozen no change IRS audits. It’s been three formal audits. It’s never been an IRS watch list or Dirty Dozen. There is a private letter ruling. All of those audits were no change audits, the biggest one was in California was $125 million deal, and in so it’s batting 1000, after 1000s of closes in the part of it, why it is a rocker, and you probably know, the tax code, it’s IRC 453. It’s just an instalment sale, and so as a seller, you can carry back paper, for example, that $30 million business owner that she might know who’s selling, he could technically carry back 100% financing for a buyer, he’s not going to pay tax on what he hasn’t received yet, it’s in a deferral state. The reason you don’t typically do a traditional instalment sales is (A) he wants to sell the business and move on (B) he might have to foreclose on it, and this is where the Deferred Sales Trust is really unique in that it becomes a third-party trust, where he actually sells the property, a company to the trust, prior to the trust selling to the ultimate buyer.

The cash goes to the trust, and the seller receives a promissory note, and it’s set to pay him over time, slowly, and as it pays him, he pays tax ordinary income tax on the interest payments, he dips into principle, it’s capital gains tax. That’s the short answer, but he’s no longer tied to the old asset, and now the collateral that’s in the trust can be secured against multiple assets, again, and you can dollar cost average, and we have to say can put it into safe harbour. Because a lot of our clients, they’ve made their wealth, and they’re part of the baby boomers, and they’re going look, I don’t necessarily need more wealth, I need to preserve it, I need to, figure out a way to pass it in a responsible way through living trust and getting outside of the taxable state. But I feel trapped by this big business because of the tax or this big public-private stock holding I have or cryptocurrency or it also works for people, primary homes, that aren’t eligible for a 1031 exchange, and that’s what it is works for if that makes sense.

Rocco:

It makes a lot of sense, and I’m definitely excited to learn more about this now, any restrictions in any states or anything like that?

Brett:

All 50 states, and it can also be someone who’s not even a US citizen, if they have assets that are subject to US capital gains tax, it’s even more powerful for them, because they typically only have a $60,000 exemption on the estate tax for non-US citizens. Whereas a US citizen has 22 million married 12 million single. It’s even more powerful for people who are outside the US who own stuff in the US. We have worked for all all all 50 states, and anyone wants one more thing go to CapitalGainsTaxSolutions.com. That being said, are you ready for the lightning round?

Rocco:

I’m ready in case one more quick question. How does this have to be set up before somebody sells their company?

Brett:

It does the timing is crucial. In fact, we want to make sure that the buyer hasn’t removed all contingencies, that we can set up the trust, we work on a no-cost, no-obligation basis so that if for any reason, the deal doesn’t close, and the reason you don’t want to do it, no cost, but we do need to set it up prior to the buyer moving on contingencies is basically the law of constructive receipt. If it’s gone too far, it’s too late. But if we set it up prior to, and we can set up deals in 72 hours really fast. But it’s emotionally tough. I always tell people to underwrite the exit plan before they actually sell the business or company or asset. Because once you get these two involved at the same time, especially for new tax strategies, emotionally can be a lot to swallow. We really try to educate as much as we can prior to but we’ve done deals very quickly. Close about a deal a week, these days, and so yeah, that’s how that works.

Rocco:

All right, one last question. That’s going to be it. When do they get when does the IRS actually collect on the taxes?

Brett:

Payments are typically made, most of our clients are taking immediate payments from the trust, as the next month, it starts out and so they’re gonna be paying interest on that ordinary income tax on that right away, and then as they dip into principal, and some of them take big distributions that close to that’s a part of the principle, they’ll pay capital gains tax on that, and so it all depends on when they receive it. It’s kind of like an IRA in that scenario.

Rocco:

What happened, let say the person passes away?

Brett:

It passes inside the living trust and then the kids can step into their shoes right and continue to tax deferral over time.

Rocco:

This is like in perpetuity?

Brett:

It can be. But it’s in 10-year increments. There’s a balloon payment due at 10 years and then it’s in 10-year increments. Typically it’s how we set it up. It just depends on the net worth of the client the size of the deal, but yes, the kids it’s it can continue to go, it’s pretty remarkable. Our heads exploded when we first heard about it, but within the banks, the qualified intermediaries, the national law firms are Have the deals, the track record. It’s all there. It’s just it’s proprietary, it’s protected, and until someone is doing it. You have never heard of it because most people just don’t know this is possible or they get confused with a Delaware Statutory Trust. They go, I know DSTS. No, that’s a Delaware 1031. Or you can sell it’s like a tenant in common, you can move it into another piece of property with a big corporation. Ours is a Deferred Sales Trust, which is a completely separate part of the tax code. Most people just don’t know about it.

Rocco:

Sounds great. Well, I’m definitely gonna learn more.

Brett:

Thank you for asking the questions. I was cool. I appreciate your interest. Let’s go into the lightning round now, and so the lightning round is just going to consist of a few questions, Rocco, and just real quick answers. If you could go back to your 25-year-old self Rocco, what’s the one golden nugget you’d make sure to tell yourself to do?

Rocco:

I would say have more kids.

Brett:

How many kids do you have now?

Rocco:

I have two and I love them to death. But I wish I wish I had two more.

Brett:

I got five. I got two 2 to 11, and it’s we are at our max, but I’m glad you least had two because I have heard people say I had one, and I wish I would have had more like I’m in fact, every person I think I just about met and health things aside. If they had the health, they say wish or at least had one more. I’m glad you least had two. What are they doing now, Rocco?

Rocco:

My son is in seventh grade, and my daughter is in 10th-grade. Great kids and they’re a joy, and they’re a lot of fun. A lot of fun to be with.

Brett:

Second question. What’s the number one book you’ve recommended or gifted the most in the past year?

Rocco:

I would say the book, Who Not How by Dan Sullivan. That’s a terrific book on identifying the who’s in your life that can help you achieve the house? I would say that book.

Brett:

Next question. What are you most curious about right now?

Rocco:

I’m actually really curious about the trust that you’re talking about. I want to learn more about that, and I’m most curious about what’s gonna happen in 2022.

Brett:

It’s gonna be a big year. I mean, there’s so much kind of pent up that could change and big impact. Thanks for the curiosity on the Deferred Sales Trust too. Second, to the last question, what’s your favourite leadership quote, or theme that you strive to live by?

Rocco:

I would say never, never ever quit. I think it was Churchill that said that so it’s never ever quit.

Brett:

I love Winston Churchill. love that quote. Last question, Rocco. After all the people you’ve helped the businesses, you built the book you’ve written, by the way, plug that book here in a minute as well. How do you stay centred in your values? How do you stay encouraged to charge to reach new heights?

Rocco:

I would say through planning I spend a lot of time doing strategic planning and not only do I do business planning, but I do life planning I do planning for myself and I also do planning for with my family, and this ensures that I’m trying to get the most out of life, we all focus on doing business planning and focused on financial planning, but doing life planning is equally if not more important than financial planning in my opinion.

Brett:

Fantastic and Rocco for listeners who want to get in touch with you. Would you remind them one last time what’s the best place for them to find you?

Rocco:

Right through my website which is RoccoACarriero.com, that’s ROCCOACARRIERO.com.

Brett:

Rocco, I want to thank you for being on the show everyone, I want you to check out his book, Three Cords Approach, and it’s all focused on helping you to live a life and wealth management in a way that is is is amazing, especially for you business owners out there, making sure that you’re leading a balanced life, that you’re approaching a business yourself and your family in a very, very thoughtful way. Check out the Three Cords Approach. That is the word the number three spelled out Three Cords Approach and Rocco Carriero. I want to encourage you to keep losing the gifts and talents of listening well to others understanding that who’s connecting everyone so they can create and preserve our wealth and I also want to thank our listeners for listening to another episode of Capital Gains Tax Solutions Podcast. As always, we believe most high net worth individuals and those who help them which they struggle with clarifying their capital gains tax or options. Not having a clear plan is the enemy and using a proven tax deferral strategy, such as the Deferred Sales Trust is the best way for you to grow your wealth you can go to CapitalGainsTaxSolutions.com To learn more about all of that and you can also join our free mastermind it’s our Cryptocurrency Deferred Sales Trust Mastermind trying to make the Deferred Sales Trust very simple, and also teaching you how to use the Deferred Sales Trust for business sales for real estate sales. We have current clients on there we have people learning for the first time just go to CapitalGainsTaxSolutions.com It happens every Friday at 10 am PST, 1 pm Eastern Standard Time to Register Right Now. Thanks to everyone for watching the show or listening to the show we appreciate it.

Important Links:

Rocco Carriero
Rocco A. Carriero Website

About Rocco Carriero

Rocco A. Carriero is a comprehensive Wealth Advisor specializing in working with Business Owners, CEO and Entrepreneurs. He is a Chartered Retirement Planning Counselor, Accredited Portfolio Manager Advisor and holds an MBA in Banking & Finance with over 20 years of experience. Rocco has appeared on Fox, NBC and his financial insights have been featured in publications including the Wall Street Journal, Forbes, Fortune, Wealth Management Magazine as well as many other local and regional publications.