Tim Picciott on crypto in trusts and tax planning

0:00I'm Ashlyn Addison from event change audio for investmentpitch media and FinTech news network and today on blockchain interviews we have Tim patch out a financial planner specializing in the cryptocurrency industry it's a pleasure to have you on the show today Tim thank you for being here Thank You Ashton pleasures mine awesome so if we could start out a

0:20little bit with how you got into the crypto side of financial planning and I heard that you had to quit your job just to speak at a crypto conference if we could get the backstory on that yeah so I'm gonna probably since about 2009 2010 I got into at least in America we had the Ron Paul movement so I sort of got exposed to the libertarian you know and

0:41the Fed type movement and so I was concentrating more on the end the Fed movement which is unusual because I came from I mean I was in a class that won the national competition on the Federal Reserve and now here I am you know rallying against it so that was really my first exposure but you know I found out about Bitcoin at about $3 but I outsmarted myself and didn't uh didn't

1:01get any and it was really when I found out about aetherium and smart contracts that's one like the aha moment came to me and I realized well hey there's you know a lot more to this than people just you know passing around you know fake money back and forth you know not to offend anybody but to the average person out there who hears about Bitcoin at the

1:17first for the first time it sounds ridiculous and then I found out about smart contracts and it really just blew me away so fast-forward you know I guess it's been eight nine years later I'm at a pool party with a early crypto adopter Ernest Hancock who he was I think the second radio show host in America to start interviewing all the crypto guys behind Ian Freeman a free talk live so I

1:39mean Ian Freeman's the guy that got Roger Vere basically interested in Bitcoin and Ernie wasn't too far behind him so Ernie he's out of Phoenix and I was at I was at his house and he knew me as the financial planner guy and he's like hey we got a bunch of rich crypto guys this is last August too so I mean this is before the major major run up and he said you know hey what of what

2:01strategies can you do for these for these crypto guys in terms of like tax loopholes and different you know tax planning strategies and so I you know thought about it for a little while and I knew what I would do for someone if they came me with you know ton of money in the traditional markets but not necessarily Bitcoin fast forward you know basically

2:19a week later and I've made the connections and found out how to basically get everything done and and basically you know fast forward a few months later I get introduced to Jeff Berwick dollar vision allanté and got invited to speak down at his conference and my broker dealer at the time which was the largest independent broker dealer in America so not like a

2:39fly-by-night operation they actually banned every advisor in America from speaking about blockchain and that was right before I was about to give my talk on blockchain so meanwhile I had you know six figures coming in from a business I built up I was a 1089 independent contractor I wasn't even an employee and I just told him hey you know I quit the broker dealer side of things stay

3:01with the registered investment advisory that I was with and then about a day before the conference the registered investment advisory I was with then told me we don't want you to speak in here either so then I had to quit that luckily I had already been developing plans you know kind of thing that this might happen because what I did was I also and this is kind of jumping ahead a

3:20little bit but I got a hold of some guys who they specialized in what's called self-directed iras and this was actually not even at a crypto conference it was a financial media conference I had nothing to do with Bitcoin at all got introduced to this guy Kirk and who specialized in this area and we decided that we would team up and just unfortunately it ended

3:42up taking the state of Arizona about five months to approve my paperwork which meant that I was without a job for five four five months thinking that it would take you know an afternoon to get approved like it did the last two times I left to go to you know to advance my career I was taken but apparently when you have you know self-directed iras and crypto IRAs and

4:02how you're gonna destroy the current financial system they don't like move you to like the front of a stack to to get you to get you you know in front of the line is what I found out so it's been an interesting experience but you know so so no one could say that haven't paid any dues or haven't had to you know I'm not just you know like some of these

4:20guys you know all of a sudden are coming out when bitcoins at 20,000 and all of a sudden they're touting themselves as you know to be like the experts and no one obviously knows everything about this I mean because the space evolves you know so so rapidly as I'm sure you're well aware of I definitely agree it's evolving ever so rapidly and especially now that people are starting

4:39to incorporate it into traditional finance in the United States I'm sure you're well aware of you've been working in the industry for a long time and now more people that are looking to get into Bitcoin and into cryptocurrency that are normally in the stock market they have no idea how to own their own coins and they're just looking to add it into one

4:56of their pre-existing funds so maybe if we could touch a little bit on some of the traditional financial assets that you got that you know how to manage with cryptocurrency I think you touched on self-directed IRAs but let's just roll back to trusts because a lot of more people are familiar with trusts can you speak a little bit about how cryptocurrency is incorporating with

5:20trusts and what people can learn into those tax loopholes and saving taxes on their earnings yeah absolutely and first off I just want to say that a lot of this stuff if you really want to dig into the weeds it gets very very technical so I did give it a talk that I mentioned down at the dollar vigilante summit that I mean in order to get there and you had to get to Acapulco Mexico

5:41which is one of the most dangerous places on earth supposedly to get to and it was like a $500 ticket so if you go to the Liberty advisor calm slash crypto coin just for your listeners I have two Investor guides on both the self-directed iras and on the estate planning that gets into a much deeper dive in all this and I have a 15 minute presentation that I

6:00gave at the TD V summit and then I have an hour presentation that I gave that digs into this even more so you know you don't necessarily take notes on this stuff and and today we're only going to hit the highlights but what a lot of people don't realize is there are charitable trusts and when you see all these guys like you know Warren Buffett and Bill Gates and they say they gave

6:19away all their money well I Got News for you they didn't really give away all their money and if people actually knew what the tax system was like I mean the question would be almost like why wouldn't you want to put your money into one of these trusts so you can put your money into a charitable trust and the terrible Trust pays you so you put your money in there you get a massive tax

6:39break for putting your money into there your he grows tax-free why it's in there you can diversify into other assets and so what I did was I had a head of scenario and again I'm just speaking out like the the highlights of this right now but I used a 55 year old guy you put 15 million dollars of crypto into one of these trusts and he isn't sure you don't

6:59trigger any capital gains and so you get it close to a fight this guy in particular would have gotten close to a five million dollar tax break for doing this so unfortunately I didn't have my company up and running because when I thought of this and by the time I wanted to get it up and running it was you know the massive mania had already kind of kind of already happened but now just

7:20that five million dollar tax break is probably worth even more than a lot of people's crypto it's worth way more than almost everybody's crypto portfolio but in this example is you know the tax break alone would probably worth even more than what people's than the amount that you put put into it because everything has gone down so much so this is a way for somebody to diversify their

7:41assets I mean you don't have to but it could be weight whether it's other Kryptos or other businesses but you could diversify your assets not trigger any capital gains and long story short is that person that put the fifteen million dollars in I used an example where they're pulling 5% out a year I just kept it at $750,000 a year to make that math easy and long story short is

8:04if this guy were to passed away at age 90 he would have been able to Trent and assuming a nine and a half percent growth rate he would have been able to transfer about a hundred and ninety three million dollars upon his passing and a person that didn't do any of this planning and I you know assume that they would earn a little bit a tiny bit more to you know take into account some of

8:20our fees over here they would have passed on fifty seven million dollars less to their heirs so you know I mean you got 57 million reasons right there of why you might want to try it and again this is and there's many different that Trust is a very generic term so it's sort of like saying you know crypto or Bitcoin but you mean different cryptocurrencies it's a lose a whole big

8:43wide array of things that that can mean and depending on your age and your situation you know what works out what it worked out for this guy wouldn't necessarily work out for you it just you know really kind of depends on your own situation and working with a planner that really knows this stuff inside and out and that's why I only came to me as a financial planner because he knew that

9:04I and a certified financial planner at that which is you know not a very easy thing to get I was probably one of the youngest people in America to ever get that and to have somebody like me that's philosophically believes all in all this stuff and and the Fed guy who you know knows both sides of the coin no pun intended you know it's it really would behoove

9:23people who have large gains whether it's in crypto or not to learn these types of strategies because there's two tax systems in America there's one for the informed and one for the uninformed and so it's time for you guys get informed that's great Tim it rings very true and that sounds like a heap load of savings fifty-seven million dollars so the average investor in a cryptocurrency

9:46obviously may not have that much money and is it just as worth it for you know low to mid range investors to also put the crypto in a trust I mean you probably want to have about like a seven figure type gain before that really starts making sense because what you're doing is you're drawing an income from there so it depends on how much income you need to live off of so you know

10:09really kind of you know take 5% of whatever amount you want to live off of so if you want to live off of you know a quarter million dollars and you've got to have five million in the trust to be able to pull it out now I mean without getting too technical and again if you want to get more technical than you can go to the Liberty advisor comm slash crypto coin and then I view

10:27you can get as technical as you want with all the stuff I've got in there but I mean the higher percentage that you take out then the you know less tax break you're gonna get so there's all these different variables that go into this but I would say if you're a little bit older I mean if you're like you know 65 70 75 you could probably it could probably make sense for less than that

10:46amount or if you need to take out a big amount to fund something there's other strategies that don't necessarily involve trust that involves certain types of foundations that might be worthwhile as well but I mean you're probably if you're sitting on like five thousand dollars of gains you mean it's not gonna be worth it but I don't make the rules and yeah yeah

11:08people I'm sure there are definitely ways that you know financial planning even for low and medium-range investors that you can save a bit so it's always good to be informed because information is key right absolutely and that person that's a low I mean there's a lot of people who invest in you know a thousand bucks in the Bitcoin who you know we're

11:25a low investor who are now you know multimillionaires so I mean it's not to say that some of these projects couldn't be worth a lot of money in the future I mean there's obviously a lot of crap out there but I mean just look at people who would have panicked and would've sold Apple back at the low mean there's people that sold Apple at $3 $4 after the crash and now it's a trillion dollar

11:45market cap company I was thinking that sorry amaz Amazon was at $3 and I think Apple wasn't probably too far away from that yeah both one trillion dollar companies now pretty amazing yes so one interesting dichotomy in the cryptocurrency industry is that a lot of people are in cryptocurrency because they want to hold their own funds they don't want anybody else to control their

12:08funds and that's sort of getting away from you know banks and other financial intermediaries holding funds on your behalf when you go into trusts don't you sort of go back to that place where you were with the banks however it is about trade-offs and if you can have tax breaks and it's worth it then it may be worth it but do you see that issue arise

12:29for many people that are in cryptocurrency I mean you sort of skipped ahead to the next section in order we get into the self-directed IRAs and that's where that's really prevalent but depending on what type of trust you're dealing with in some cases you can actually be the one that holds on to your private key and other types of trusts you won't be

12:46it really just kind of depends which one you're dealing with but the one that I mentioned in the first example in that case that gentleman would be able to hold on to his private keys legally if you wanted to so okay well that's good to know because a lot of people think that you know they just think oh it's a trust it's going to some other entity and maybe I don't have sole control over

13:06my funds like I would want in the cryptocurrency industry yeah and again it's Trust is such a large nebulous term that means so many different things and there's so many different types of trust I mean there's you know terrible lead trust treble remainder trust there's you know I mean just awesome just blow people's minds all the different types of trust and most

13:24advisors me forget about crypto don't even know all the ins and outs of these different and I don't know the ins and outs of every single one of these but that's why I've teamed up with a guy who basically helped start with it's known as the donor-advised fund space so I had had that pool party at Ernie's house and then literally two days later I ran

13:42across this guy of a father of a friend who I didn't even know what his dad did he's okay I need to introduce you to my dad and finds out that his dad basically you know started the donor-advised fund space that before it even had a name that then fidelity in their burping off so I've got really good contacts on that side and I've got really good contacts

13:58on the self-directed IRA side as well to really bring this type of information to the masses but one important thing is since you are getting a big tax break you want to make sure that you're kind of you know obviously so you know sell high because you know if you think that bitcoin or your crypto is gonna go a lot higher then you wouldn't wanna necessarily put it into the trust now

14:17because the tax break is gonna be predicated on the amount that you put in there so you know that but if you're looking at like leaving the country or announcing citizenship I mean there's all sorts of different use cases for this type of knowledge and for this type of planning that's awesome so we don't have too much time so let's go through a couple more topics we could

14:36dive into a coin ETFs and futures a little bit at the end but first I just want to quickly go through the self-directed IRA that you mentioned and how it differs from the trust yeah so you know what I saw was in late 2016 there was a lot of people who I talked to who had cashed out their 401ks cashed out their eye arrays to buy Bitcoin which you know looking at hindsight was

14:59a great move for them because then it making a bunch of money but what they had to do is they had to pay a 25% income tax and they had to pay a 10% penalty and so I was like well if you're gonna pay a 10% penalty you might as well do what's called a Roth conversion so that's where you take your retirement funds and by moving it into a Roth you avoid a 10% penalty but the gains are

15:20actually all legally tax-free so I do have an example here where it shows I'm reading off this where it shows that someone and I created the example so it shows that someone who invested this is January 1st 2017 they put a hundred thousand that they cashed out a hundred thousand dollars other eye 401k and a year later so January 1st 2018 they would have had 896 thousand

15:42dollars $450 so we were talking close to nine hundred thousand dollars they would have had so you know they're doing pretty well and so that would have been a taxable game though from a hundred thousand to nine hundred technically that would have been a taxable gain however if they would have done something called a Roth conversion they would have been able to forego that 10%

16:00fee penalty and then they would have had slightly over a million dollars and the here's the kicker is that the gains would have been tax-free so now you could actually you now had $900,000 gain that was tax-free versus so a lot of the anarchists and their capitalists will screw it you know I'm just gonna go cash out of my 401k like well good you're gonna give the government more money

16:23which is you know less you know anarchist and you know the tragedy that I'm proposing and what we're doing through these self and and basically what I found out that there's one company doing this and they're charging about 15 percent up front to do it and so we're really looking at you know the 25 percent fee from the government another ten percent penalty at plus

16:44their other competitors 15 percent fee you're looking at half your money gone right off the bat and I just thought it was you know criminal the type of charges that were out there which is why I decided to team up with basically the leaders in self-directed iras to roll this out and a self-directed IRA what that really is is just the Cliff Notes version of it is you created an LLC the

17:05LLC is owned by your IRA and then you're then you can be the manager of your LLC that then holds on to your keys to by the various crypto so again you know the big concerns are well hey I don't want to have you know another institution or another fund or another Wall Street holding on to my crypto which then leads us into what is probably eventually

17:25coming which is going to be the ETF which probably won't even have actual Bitcoin in the ETF it'll be these future contracts which will then settle also in cash so you're not actually holding on to the crypto and if you want to do something like that now you can buy what's called the there's a unit investment trusts and so they go out and they buy Bitcoin they actually hold the

17:46Bitcoin in the trust but the problem with the trial sometimes the trades I've seen a trade that over a hundred percent premium so if Bitcoin was that ten thousand it'd be like you're buying it at twenty thousand because people it got bit up now the spreads haven't been as high since the futures have come out but still you're not really owning the crypto but by my

18:07method with a self-directed IRA you're actually owning the crypto and so what we're doing is and since we are like I mentioned I had a five-month delay getting this started because of you know the government efficiencies that we all love so much but now we are rocking rolling on this we got a first few underway right now and so we're actually for a limited time offer for the end of

18:27September not charging any setup fees to do this for people and you know we do have you know fees ranging from one to two percent a year depending on what you're looking to do and but here's the big difference is we can also manage your traditional assets as well because I don't think everyone should have all their money into Bitcoin you know obviously you know it's very speculative

18:45obviously it can go to zero you know you don't have all your eggs in one basket but I also think that the stock market is incredibly overvalued and you know I'm sure a lot of you listeners you know understand central banking and probably understand how the Fed works and those are all kind of like my main wheelhouses of topics that I talk about but you know

19:05we manage money in such a way where we help protect the downside by buying different types of put options where you can essentially have a very avid portfolio that doesn't have a lot of risk of downside risk in it but in case you know the central banks or when the central banks start printing a bunch of money you've got all the upsides so I really if you're looking in the crypto

19:26space I mean I can help you out from just about every single angle of this and if I can that I can probably help point you in the right direction because there are a lot of I'm not saying anything I said right now it sounds easy or simple or you can do it yourself but there's a lot of traps where if you make one mistake well then boom all of a sudden your retirement funds are fully

19:43taxable and there's a lot of little mistakes and and and basically pitfalls that people can make and so we're there to basically kind of hold your hand and help guide you through the process and one last interesting point about this is there's some research done by Tom Lee a fun strat that showed you could actually put in between two and percent of your portfolio in the crypto

20:05and you would actually have your portfolio be less volatile and actually have much much much greater return so so I did do a video on this a podcast maybe I can send it to you guys and you guys can link it later on but it's called how I think it was something like how adding Bitcoin or crypto could actually decrease your volatility in your portfolio because it's not correlated to

20:27anything so it's actually pretty pretty crazy we had tons of great topics today we'll follow up we'll send people to your podcast and the liberty adviser down in the description below and let's follow up with some more interesting topics next month where we can dive into where the market is and how we can plan for the future as soon well thank you for having me

20:48again it's of Liberty advisor com forward slash crypto coin is an offer just for your guys audience where we've got the presentations got the investor guides everything they want to know that I've spent you know ten years of knowledge trying to put together that we've got it down for you guys to help out the community great thank you so much yep thank you

21:07take care you