Wealth Actually

Frazer Rice
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Covering the issues that affect business, entrepreneurship, wealth, trusteeship and culture.

  1. DEC 1

    DIVORCE FOR THE WEALTHY WOMAN

    BROOKE SUMMERHILL has written a new book to address "Divorce and the Wealthy Woman." https://youtu.be/FFSeBg3XT8M In this conversation, Brooke discusses the complexities of divorce, particularly focusing on the financial aspects that wealthy women face. She emphasizes the importance of understanding one's balance sheet, hiring the right professionals, and navigating complex assets during divorce. The discussion also covers the emotional components of divorce, the significance of having a supportive team, and the benefits of open conversations about finances, including the role of prenups. Takeaways from "DIVORCE FOR THE WEALTHY WOMAN" Divorce can be a daunting process, especially regarding finances. Understanding your balance sheet is crucial during divorce. Breathing and staying calm can help alleviate anxiety. Hiring the right professionals is essential for navigating divorce. Complex assets require specialized knowledge and support. Cash flow planning is vital for post-divorce stability. Parenting during divorce needs careful planning and support. Open conversations about finances can strengthen relationships. Prenups can facilitate healthy discussions about money. Divorce is a journey that can become easier with the right support. Chapters 00:00 Introduction to Divorce and Finances 02:58 Understanding the Balance Sheet 05:45 Navigating Complex Assets in Divorce 09:05 Building Your Professional Team 12:04 The Emotional Component of Divorce 15:09 Modeling Settlements and Cash Flow Planning 17:56 Parenting and Financial Responsibilities 20:41 Preventative Measures and Financial Awareness 23:53 The Role of Prenups in Marriage and Divorce Transcript of "DIVORCE FOR THE WEALTHY WOMAN" Frazer Rice (00:01.186) Welcome back, Brooke.Brooke Summerhill (00:03.378) Hi, thanks so much for having me. I'm so excited to be here. Let's chat about the most fun topics in the world. Divorce and finances, right?Frazer Rice (00:09.952)Well, and codified in your new book, Divorce for the Wealthy Woman. I have already started, and I think it's a winner for a bunch of reasons. The big one really is addressing a viewpoint that I think has been missed by the financial books generally speaking,Brooke Summerhill (00:15.794)Mm-hmm. Frazer Rice (00:31.086)It really corrects a problem, I think, around information asymmetry in finances generally. And unfortunately, we've both been around it from a divorce perspective. Tell me what, first of all, let's let our listeners remind themselves of your practice. And what do you do there? And then what was the book trying to accomplish? https://www.amazon.com/Divorce-Wealthy-Women-costs-that-ebook/dp/B0G1ZMFVCN/ Brooke Summerhill (00:53.554)Okay, so hi, I'm Brooke Summerhill. I do specifically for the last like 15 years in finance. Specifcially in the last five specifically in divorce and finance for wealthy women. So I'm not very creative my book specifically and my podcast is literally called divorce for the wealthy woman. I love being able to understand the perspective of someone going through divorce,not feeling the fire, and creating a years long fight. I help alleviate the stress of divorce and go through the finances, the emotional aspect, I'm in financial psychology. I've been doing that and I plan on continuing doing that. It's a fun, fun, fun career path for me.Frazer Rice (01:40.526)One of the great things I think about your book is it starts where I start. You really have to be comfortable with what your balance sheet looks like. Take us through a little bit about your experience in helping wealthy women get acquainted with something they weren't familiar with initially. However, they have to get familiar with it real fast.Brooke Summerhill (02:03.014)So typically, you go to a lawyer . You're about to get divorced and it was blindsided in your face. my god, what is going on? He wants to get divorced or she wants to get divorced. Doesn't matter who you are, heterosexual couple or not. It does not matter. You might not know where the finances are, right? And you're going to a lawyer. You expect them to help you out, but you don't even know where the assets are. You don't know it's on the balance sheet. So the first step is breathing.Let's not get into this sympathetic nervous system. No fight or flight, freeze, thaw, and let's not go there if we can't avoid it. And really just breathe and understand it's going to be OK. That's the first thing I want to just point out is you can do the work on yourself without having to do hard interval training. You can just breathe. So you're going to breathe and understand, OK, the balance sheet. I can figure this out. You got it. And you might need to hire someone like myself who's a certified divorce financial analyst, you might have your lawyer help you. You might ask your soon to be ex if they're willing and amicable to understand the balance sheet. You might go to a financial advisor, wealth manager, your family office and ask some questions. So this is a time of learning and it's okay that you don't know where everything is. And the balance sheet is terrifying for most people. 98 % of us have money anxiety. It's okay. Breathe.Get help and support where you can. The foundation is the balance sheet. If this is the only thing you take from today, is just breathe and know that the foundation is your budget, your expenses, what's coming in, what's going out. Can you figure that out? Even though you might not know where your assets are. Do you have Bitcoin? Or have different properties? Do you even know if there's liens, mortgages, loans on them? That all will get figured out. But you've got to know what you're spending.I would say, you tell me if you have a different experience. But most clients do not know their budget. And that's OK. Doesn't matter your wealth, income, anything. Most people, at least in America, do not know what they spend every month. So that's the foundation is to start theirs. Understand, what are you spending? Just keep a little log. It can be old fashioned. And I have plenty of technological apps that can help with this. But keep it old fashioned. Just write down, what are you spending? And keep that for a week.Brooke Summerhill (04:28.752)That can help you in your divorce process and remember to breathe. There you go.Frazer Rice (04:32.91)And it's part of my process, I think, is to just understand what you're spending. And then the next step is really understand where it comes from to help support that spending. It's like analyzing someone who earned 100 million dollars from this movie. It's like, OK, that's the headline. Now it's a lot different in reality. Certainly taxes, how it's paid to you.We'll get into this in a second, and sometimes it's not in cash. Sometimes it's in different types of assets. Whether it's stock or maybe you own homes, and it may not be necessarily liquid right up front. It sounds like we're parking our cars in the same garage on that front.Brooke Summerhill (05:19.154)Absolutely, absolutely agree with you.Frazer Rice (05:22.114)So maybe let's go through some of the complex assets that you think about that come up in any, not all divorce situations, but definitely in many of them. Many times people have grown their wealth through a private business. so even, you know, the number that is settled upon in the divorce settlement may not be readily available from a cash payout perspective. How do you take people through that?Brooke Summerhill (05:47.473)Oof. So I have an entire chapter on businesses because majority of my clients, I'm going to be very sexist here and say majority of my clients, husbands in a heterosexual relationship do own a business or have just been bought out of a business or are starting a startup or have something behind the scenes that they're aware of or maybe not even aware of. So businesses are huge thing. That's why I put a chunk of it in my book becauseThe biggest advice I can give is hire, I'm going to be a repetitive throughout this whole podcast today is hire the right professionals if you can, because you don't know what you don't know and that's okay. You're going to breathe through that and acknowledge you don't have to be an expert in divorce. But when you have a business reading, listening to podcasts, doing all of those exercises are wonderful and hiring an expert. So getting someone who's understanding the finances in a divorce specifically, so business valuator, or just having a consultation. That's enough to understand, this, I need a forensic accountant, because I don't know anything that's going on within this part of the businesses that I'm a part of, but I'm not really a part of, or I need a business valuator. Let's just have a consultation. It could be really a non serious, non threatening, non emotional way to start it.I'm just going to have a consultation to understand, do I need this business valuator? I would just at least have those conversations to understand more about your husband's business or your business in general on what are the numbers behind it? Because it is very complex, just as you're saying. Businesses, absolutely, you want the right experts involved.Frazer Rice (07:30.506)And sort of as a broader business, or not really business, but sort of as a broader sort of contextual situation here, the type of wealth, whether it's private funds, people who are invested in private equity or hedge funds or stock options or RSUs for people who are in the tech world, things that are held in trust, there's the concept of carried interest and real estate and concentrated stock.This is to go back to your comment that there are people out there that can help you. Understand those assets, I guess for lack of better word, can and can't do. As far as either provide cash flow or are easily divisible in a divorce settlement.

    29 min

  2. NOV 23

    THE TENNESSEE WEALTH ECOSYSTEM

    Wealthy families are discovering Tennessee's legal and tax ecosystem as a key component for their long term wealth strategy. I spoke with ANDREA CHOMAKOS from Pendleton Square Trust on Tennessee around these advantages that the Tennessee Wealth Ecosystem provides in the context of other states' legal systems and economies. We cover directed trusts and Tennessee situs, and even a tip like the Community Property Trust, which is interesting in both prenuptial tax planning and estate planning contexts. https://youtu.be/CiR8eoAG-iI "The Tennessee Wealth Ecosystem" Transcript Frazer Rice (00:00.814)Welcome aboard, Andrea. Andrea Chomakos (00:03.128)Thanks, Frazer, happy to be here. Frazer Rice (00:04.696)Well, glad to have you on. Always happy to talk to friends of mine at Pendleton, talk about Tennessee and trust administration generally. Our listeners are probably pretty well versed as far as the idea of trusts, but I don't think it hurts to go and talk a little bit about what the trustee function normally entails as we talk about what is interesting about Tennessee and other jurisdictional issues. Andrea Chomakos (00:29.358)Absolutely. So Frazer, it's great to be here and share some conversation with you and your audience. While I have been in the professional fiduciary role for several years, for several decades before that, I was a practicing attorney. So I would often have conversations with my clients and drafting their documents and asking them decisions about who to appoint as a trustee. One of the very first conversations we would have is what does it mean to be a trustee? As I have now come over to the other side, broadly stating that the trustee has the responsibility to administer the trust for the sole benefit of the named trust beneficiaries in accordance with the trust terms. That seems like a lot of really big words that don't make a lot of sense to the average person. I get it. When I was practicing, a lot of my clients, their reaction would be, okay, so you're just telling me that this person is the person who makes the decisions about distributions and that's great. I can go, you know, no big deal. And the reality is, yeah, the reality is it is a big deal. Because it's more than just making distribution decisions or making them in a vacuum. You have to look at the broader picture. Frazer Rice (01:41.228)It's more than that though. Andrea Chomakos (01:55.598)But it also entails managing the trust assets and investments. It means making those important distribution decisions and understanding the impacts those are going to have not just in the short term but the long term. Filing and paying tax returns for the trust. Communicating with trust beneficiaries, providing reports and accounts. And even all of that sometimes seems like not that big of a laundry list but Let me give like an example that I ran into. Everybody loves a good example. So when I say a trustee is responsible for investing and managing all of the assets of the trust, that also means the protection and preservation of those assets. And it's incredibly common to see a trust hold some real estate, oftentimes a residence that a trustee or a beneficiary lives in. Frazer Rice (02:24.58)That'd be great. Andrea Chomakos (02:51.094)And you may say, OK, well, no big deal. Like if something happens, we'll just get it fixed. Well, it's more than that, right? You need to really understand what that means and the risks you're taking and the potential liability you're taking if you don't manage those issues in a way maybe different than you would if it was just your own house. So I was at a prior institution and that institution was serving as co-trustee with a beneficiary who resided in some trust-owned property. And lo and behold, you know, got a call from that beneficiary saying, hey, there was a leak with one of the pipes in the house. So I just went out and got some duct tape and put that around the pipe to stave off the leak, but now it's gotten really bad. And you're just sort of like, well, wait a minute. Like that's. Frazer Rice (03:34.276)Hmm. Andrea Chomakos (03:47.573)As a trustee, that's not an appropriate response to fixing a leak, it's not a roll of duct tape. So it's things like that that trustees are responsible for. Frazer Rice (04:00.004)One of the things too that's happened in modern legislation is that those three functions you talked about, the investment, the distribution, and the administration have been in many states you're able to, we like to call it bifurcate them, so that you can put an expert maybe in the investment role, maybe a family member with a corporate trustee in the distribution role, and then a corporate trustee in the administration role who, you know, they're used to doing the paperwork and the tax filings and the eye dotting and T-crossing. And in your, I guess in your experiences, we've gone through that. How have trust companies evolved to take into account this new flexibility? Andrea Chomakos (04:42.254)Absolutely, think you hit the right word. I always say the same thing, Frazier. It's a bifurcation of those duties and responsibilities. And so there are more trust companies who are embracing what we call the Directed Trust Model, where the corporate trustee is handling the administrative functions. So the reporting, the trust beneficiary communications, filing the tax returns, all of those very important functions, but ones that oftentimes are overlooked, their importance is overlooked. And other people are given the role of either distribution advisor, and sometimes the corporate trustees in these roles will make distribution decisions. But certainly the investment function is one. And as you see arise in individuals, families, using private equity for investments, other alternative investments, you see them using RIAs, multifamily offices, to manage their investments that, and those entities don't have that trustee function. There are more corporate trustees who are filling that role. And I think that we're only going to see that market increase and that demand increase. Frazer Rice (06:11.196)I don't think I could agree more with that statement. I think the idea of people having all of those functions under one umbrella really ignores just the way wealth is being managed these days, whether it's sort of peculiar assets or even, you know, regular run of the mill stocks and bonds, people have their advisors and they don't want to necessarily give that up to take advantage of trust situs and professional trustee services. Andrea Chomakos (06:21.998)Listen. Frazer Rice (06:36.524)As I talk to people around this topic, the culture of a good trustee, and especially sort of a good corporate or a good administrative trustee, there are a lot of things that go into that. In your experience, what is it that makes a good sort of corporate or administrative trustee for particular family? Andrea Chomakos (07:01.422)There's I mean, that's a great question. And it should be top of mind for all clients. Right. I think there's a couple of things. One is the institutional professionalism that a corporate trustee, independent corporate trustee provides, as well as the skill, the background and then the lack of conflict of interest. So when you think about an administrative trustee that's not managing the investments, we have no dog in that fight as they say about what's going on with the investments, how they're being managed, how they're being allocated. We, Pendleton Square and others are here to serve the beneficiaries, to facilitate communication, to help beneficiary wealth education, to continue the continuum of family values and conversations, as well as be some be a person who can sit there alongside them and educate them about the trust, about the wealth, about the impact the distributions from the trust are having on their own estate, on their own lifestyle, and really honing in on the things that they're really good at. And I think predominantly it is that being free of conflict. We don't have any other interest in the trust. Frazer Rice (08:28.252)I think the concept of staying in your lane is important. I think in the old world where the big trust companies did everything and they would allocate resources to that because doing everything required good integration and so on, it made a lot of sense. But nowadays, as we talked about the bifurcation just now, the provision of the administrative trustee functions and the distribution committees, et cetera, that feels more like an accommodation. Andrea Chomakos (08:30.913)I'm sorry. Frazer Rice (08:56.696)than a sort of focus for them. And so these trust companies that have developed, the new ones that are less worried about the investment function, that that focus is now a strength in the sense that people hire experts in that field in order to get what they need from an estate planning perspective or a site of choice, et cetera, but then to really effectuate that culture we just talked about. Andrea Chomakos (09:26.956)Yeah, I mean, think there's a couple of nuances there that you touch on that always resonate with me. And so one is. Trust business, it's a business, we all have to admit that it's a business, but is it relational or is it transactional? And at its core it's really relational. You're working alongside a family for hopefully multiple generations and as an institution you can carry forward that historic bank of knowledge in the grantor's intent, the family values as you're administering the trust. But in many larger institutions, because of just structural considerations and constraints, sometimes you have a lot of turnover in personnel. You have some loss of historic knowledge and information. And you have a compression of what it takes. not just the skills,

    26 min

  3. NOV 12

    THE MUSIC BUSINESS: “REPUTATION OVER FAME”

    Musician and label owner, Blake Morgan, discusses the Music Business and the importance of "Reputation over Fame." Ever wondered how musicians really make money? It's a tough journey filled with losses and small wins, but it's all about persistence! In this episode, Blake Morgan shares that every small gamble counts, and eventually, one big win can turn it all around.: "The people who are "for real" have no choice." https://youtu.be/j8vf5dI-cbE Transcript Frazer Rice (00:01.135)Welcome aboard, Blake. Blake Morgan (00:02.946)Good to be here. Frazer Rice (00:04.111)Well, it's really nice for you to be here. You were nice enough to invite me to your show, your residency downtown. And I was glad to reconnect and remind myself how talented A, that you are and B, that musicians are. And it got me thinking about business and how musicians and the world of music works these days. So it's a treat to have you on there. Blake Morgan (00:27.714)Thanks so much. I'm glad you could make it to the show and it's great to talk to you again. Frazer Rice (00:32.155)So let's start at the beginning. So if you're a musician, you've been bitten by the bug, you're talented, and you get that wonderful curse, what are the ways that musicians really make money and support themselves? I imagine it goes from a spectrum of busking and performing and having your guitar case open and taking… donations from there on up to the professional musician and then to the actual creator of the music itself. How do you think about that? Blake Morgan (01:01.858)Right. So, you know, I think I'm thinking about your audience and finance people and business people, you know, right off the bat, of course, for starters, the marriage between commerce and art has always been, shall we say, an interesting one, or it's been it's been a conflicted one. And it's mostly been conflicted for the artists. But the reality is, you know, I think Frazer Rice (01:22.747)Sure. Blake Morgan (01:32.897)in a lot of ways and I do have something of an eagle eye view because I'm an artist, I'm a songwriter, I'm a record producer and I'm a record label owner. And so whether you've had a career and are having one like I am or like the person that you're imagining who's just getting, who's just starting out, I think your experience basically it's very similar to quantitative finance. in that you're acquiring a lot of small bets that rarely pay off, but when one does, they make up for all the other losses. And every part of being a musician is very much that experience. So when you're first starting out, whatever that means, if you're making, if you're building tracks on your laptop, if you're, you know, I think the days of busking on the street are, probably behind us because I don't see it very much, honestly, in New York. And we can talk about why we don't see it very much later. But the reality is however you're getting into it, you're immediately in a position where you know you're going to be taking a loss. And what you're hoping is that there will be a payoff at some point so great that it will pay for all or most or some of your losses that you've Frazer Rice (02:30.203)Right. Blake Morgan (02:58.414)crude. And the truth is that really never ends. And I think that that really also kind of never ends if you're a superstar. That's really that's that's that's the gig. I don't see I don't see billionaire investors usually sort of hang up their investment coat jacket. I don't know what it is, but I don't see them hang up their cape and say, I'm out. You know, they're still trying to somehow leverage what they have into something else. Frazer Rice (03:20.279)Bye. Blake Morgan (03:27.822)And so that's the financial part of it, which is that, you know, I think especially now, if you were talking about the beautiful curse, like I think especially now there is this feeling in music that musicians make music, you know, for fun. And I've never, I'm not a musician who makes music for fun. I've never met a musician who makes music for fun. We make music because we're compelled to. That's the beautiful curse. It's not because, hey, I've got I'm thinking about doing this and it's just the people who are for real have no choice. And so I often say that my relationship to making music, and this was true when I was a kid, when I was just starting, my relationship to making music is exactly like my relationship to breathing, which is that I really like doing it. But if I didn't, it wouldn't matter because I'd still have to do it to be alive. It's a part of who I am, right? Frazer Rice (04:21.403)Sure. Blake Morgan (04:23.894)And the thing about breathing is we aren't in a position to being like, how's the breathing industry? How am going to leverage my breathing into some sort of better form of breathing that would keep the lights on? We're all doing that, I guess, with our lives in some form. But that's that awkward marriage of commerce and art, which is that our strength as artists, as musicians, comes from the fact that we have an absolute bedrock. We are compelled, a bedrock need. to continue to make music no matter what, no matter what's thrown at us. And then that's also exploited because the people who exploit us know that we're still gonna do it no matter what, in whatever form that takes. So that was like 20 pounds of answer to a one ounce question. But that's the real truth, which is I think if you're starting out, you really are hoping that you're gonna you're gonna start trying things basically to get some kind of a career off the ground, some kind of path forward to be able to make more music, some path forward where you're gonna be able to make music where you wouldn't want to have to do something outside of your own profession. People don't tend to set out to be in a profession with the overwhelming feeling like they're gonna have another profession that they're gonna have to have to pay for their bills for their actual profession. Frazer Rice (05:52.611)No question. How do you graduate from hobby to commitment in many ways? Blake Morgan (05:53.39)So. Blake Morgan (05:58.734)Exactly, exactly. And so right out of the gate, you're hoping that your ideas and your talent and your perspiration and your inspiration are going to be enough to leverage the next moment and the next moment and the next moment. Moments where you know, and you know, a 13 year old who's trying to write their first song or pick up a violin and practice, they know that they're going to lose and lose and lose. and lose and they're hoping that somewhere down the line they win and that pays for these losses and this is financial a financial truth and an emotional truth to like I've taken I often say to people like I'm a good humored person generally speaking but like I'm 96 % scar tissue at this point and so I still the joy offsets the scar tissue right I don't want to be bitter and and and I'm and I'm not but Frazer Rice (06:47.62)you Blake Morgan (06:56.969)The moments of artistic wonder and satisfaction, just like the moments of financial hope, like, my God, this actually is hitting or this actually works. This really gets the monkey off my back to be able to do more of this, right? It's very, very much the same, whether it's financial, emotional, or temporal. The time you've put in to try to do something pays off when it works. Frazer Rice (07:26.731)So this massive investment, time, emotion, skill, dollars, et cetera, what are the ways that you start to get into the green and turn it into a situation where you're actually sort of making money on what you love here? Blake Morgan (07:47.832)So if there was an easy answer to that, I would hope that you would have it and you could teach me what it was, but there's a complicated answer to it. And it's harder than ever. Art and music are devalued more than ever. The rungs under the ladder of where I've been able to get in my career have been kicked out. It's harder for people to get to where I am. The world has changed because of piracy and streaming and Frazer Rice (07:52.89)Right. Blake Morgan (08:16.043)now AI and you know, we can touch on all of these things. But I do think that there's an important panacea that will lift every facet of this. And in a world where we're seemingly fixated on followers and likes and streams and these kinds of numbers, the reality is the place that I get paid As a label owner, as a record producer, as an artist, as a singer, as a guitar player, as a bass player, as a piano player, all the jobs I have, the place that I get paid is that I have a reputation. And we live in a fame-obsessed business, music, and a fame-obsessed culture, but reputation and fame are not the same thing. And… When you're in, for lack of a better way to describe it, when you're living in sort of in a Mad Max world, the music world has turned into this kind of wasteland in a lot of ways, unfortunately. When you can prove that you know where the fresh water is and you have some fuel for your car, you know how to evade the raiders on the highway, when you actually have a reputation. Frazer Rice (09:28.603)You Blake Morgan (09:35.278)there's any numbers of ways that that winds up being valuable. And that could be a reputation of just being an incredibly professional singer who on short notice can go and sing a national anthem. That can be a reputation to say, we've been trying to make this record for months. We can't get out of our own way. We're screwed. We need someone who actually is from the before times who knows how to make a freaking record as opposed to just generating one. Right? Frazer Rice (09:48.581)Mm-hmm. Blake Morgan (10:04.683)Why would you go to a doctor? You'd go to a doctor because you need something. You can't do it yourself. Home dentistry, bad idea. Home lobotomy, bad idea. And then you're going to say, well,

    40 min

  4. OCT 22

    FAMILY OFFICE SECURITY

    Family Office Security with EDWARD MARSHALL, CEO of PRESAGE GLOBAL https://youtu.be/uLbbZg52ABg In this conversation, Frazer Rice and Edward Marshall delve into the complexities of security within family offices, emphasizing the importance of understanding risk as a multifaceted concept. They discuss the vulnerabilities unique to family offices, the interconnected nature of various risks, and the necessity of a comprehensive approach to security that encompasses governance, internal threats, and physical safety. The dialogue highlights the need for families to engage with security experts who prioritize diagnosis over fear-based marketing, ultimately aiming to enhance the quality of life for families through effective risk management. Transcript Frazer Rice (00:01.173)Welcome aboard, Eddie. Edward Marshall (00:03.074)Hey Fraser, how are you? Frazer Rice (00:04.375)Great. Thanks. You are now a member of the two episode club. We've got a few of them out there. We one of my favorite ones was with you talking about there is no such thing as the family office, which I thought was a terrific bromide that I bring out every once in a while. It can be controversial depending on who you're talking to. Edward Marshall (00:23.15)So some people like that and some people hate when I say that, but it's all good. I mean, it speaks to the whole issues around family offices and I think some of the things that we'll probably talk about today around security is if you're defining it so many different ways, we've to look at it more as a process than some actual thing that we can put our finger up. Frazer Rice (00:46.421)Well, so security and whether it's family office or regular high net worth or people generally is foremost in the headlines these days. We had the United Health Care executive who got shot. We've got different scenarios of global conflict out there. The theft around financial assets is everywhere. The urgency in the family office space, though, it seems like it's really taken on a new thing. What is your experience with it? Edward Marshall (01:17.612)Well, mean, I think we could take a look at it from the perspective and start out with this, is risk is really what we deem it and how families and companies… offices and investors are looking at risk, they can perceive it in a lot of different ways. But I think one of the things that are important for high net-worth individuals or family offices is that some parts of their just organizational DNA create these engineered vulnerabilities. So what they are makes them more susceptible. And if you think of it just from the Willie Sutton effect, right? Why do you rob banks? Because that's where the money is. It's kind of myopic. Because you have to look at the other factors. What does the family office typically have as characteristics? You tend to have a very lean operation. There tend to be sources of time, line, agnostic capital. They have a lot of trusted relationships. Their customer is the family. And they're pretty agile. So a lot of those factors come together and make them attractive for bad actors in a lot of different aspects. They could also be politically outspoken, which attracts a different kind of attention to them. And so it is… It's really an ability to understand the nature of family offices and what makes them attractive for them because they have enterprise level wealth and oftentimes amateur or retail level security and risk management practices and processes in place. Frazer Rice (03:08.009)So how do you get your arms around it? When I hear risk, think, my gosh, you've got physical risk, you've got technological risk, you've got all sorts of other things. One of the frameworks you have is really these 10 domains of risk. And we may not list all 10, but how do you get your arms around it when you're helping a client think through what their vulnerabilities are? Edward Marshall (03:30.873)Yeah, think the 10 domains of risk that we have put together as kind of an organizational philosophy for Presage Global really harkens to the fact that traditional security, traditional risk management is very siloed. I've got my cybersecurity thing that I'm focused on, then I'm focusing on physical security. Unfortunately, risks and threats don't really respect your self-constructed silos. And that old school mentality tends to lead to lot of whack-a-mole behavior and reactive behavior to these types of risks that come out. So we came up with this framework. The risks range from privacy, technological, reputational, legal, operational, financial, and so forth. And the reason we came up with that is that we were seeing the interconnected nature of risks in this space, whether it's for family offices, companies, or investors. there's a lot of interconnectivity between these risks and they can cascade. So something that starts out as a privacy risk, exposed information, a bad tweet, an Instagram post that puts out some information around you can lead, cascade into reputational issues or financial… fraud types of issues or even legal fights depending on kind of the situation that's there. And if you're not looking at risk across these different domains, how they interact and really taking a deep dive to assess it, you don't look at the entire picture. And I think that combined with not just focusing on the shiny object of a technology driven Edward Marshall (05:31.617)approach to solving risk in these issues is important as well. Oftentimes you'll see folks that work in the security space or people that have purchased something to support them on security or risk management. They'll say, you know what, we're doing great because we have X, X software, X tool or whatever it may be. But they haven't even evaluated if they even need X tool that's out there or even if X tool is properly configured so you could be spending thousands of dollars hundreds of thousands of dollars or millions of dollars if you're a company on these tools, but if they're not properly configured then all that money is for nothing and it's and And it becomes like security jewelry. We've got all this stuff that's in place. We have cameras that are of X brand and they're doing all these things. We have firewall that is of Y brand and it's doing all these things. But if you haven't properly configured it or the people that are supporting you internally and externally… some of the externally creating supply chain risk there, then it's all for naught. it comes down, and it's similar in the work that you do. If you're not looking at somebody's entire trust and estate picture just beyond the documents that they're trying to draft, how do you figure things out? It has to be not just a black and white, here's a legal document for your trust and estate. It's part… archaeology, part anthropology, part psychology, multiple other science disciplines and other disciplines that come into it to develop a document, to develop a plan, to have an execution that actually keeps the family safe. Frazer Rice (07:30.315)So when, part of this seems like a real governance issue at the family level or at the family office level. When you see it done well, who owns this task, the security task at the family level? Because I could imagine the Generation One, the matriarch or patriarch, they wanna deal with it, but I'm not sure they're the best ones to be driving it. What is a good practice there? Edward Marshall (07:58.189)Well, listen, think risk management and security, oftentimes, whether you're talking about a Fortune 100 company or a family office, is looked upon as a cost center. And I think that's an unfortunate aspect to it, instead of an enablement factor for you to go and do the things that you want, right? Good security, good risk management for a family should enable the quality and improve the quality of life for that family. If you're constantly thinking of it, we have to spend X amount of dollars on our cybersecurity or planning for our travel or purchasing this trying to reduce my privacy footprint by buying some security tool that does that and says that I'll get all of your information off the web news flash. Not possible. You know, there's thousands of data brokers that are in this country. There's legislation that is going on in different states and at the national level to try to limit the aspects of the data broker stuff. But you know what? At the end of the day… Edward Marshall (09:14.178)that information is out there to nation states and to bad actors and try telling a hostile foreign country or a hostile hacker whether they're in Brooklyn or Belarus to remove your private information from their data sources. It's not going to happen. you have to, putting it in the perspective of governance is shifting the mindset away from Frazer Rice (09:31.318)Right. Edward Marshall (09:41.467)Just being a cost center and to how does this help? All of the family office operations that are there and the family improve their quality of life by keeping them more secure. And that's a critical step to it. Then having a robust plan and really looking at the plan and testing it. This may say simple, but if you're not, if you don't have a plan and you're just trying to patch things together and you're not testing that plan, then you're spending a lot of time and not of getting a lot of good results. If you're not thinking of security governance and risk management governance through a maturity model, understanding what good looks like, where we are today, where we want to go into the future, here's my gaps, here's the things that a good family office that's focused on this issue or a good company that's focused on this issue looks like, then I think you're missing out on a lot of things for these families to really keep them

    31 min

  5. OCT 3

    US FOREIGN POLICY

    RICHARD HAASS returns to the podcast to talk about the US FOREIGN POLICY implications of Trump's Tariffs and other initiatives. We take another tour of the world's hotspots after the recent UN conference here in New York. Finally, we weave in an analogy of the recent crowd misbehavior at the Ryder Cup as a symptom of America's current mood. https://youtu.be/z4FlnrXl8tE US FOREIGN POLICY: INTRO Frazer Rice (00:01.277) Welcome aboard, Richard. We are past our technology glitch, I think. The next big thing here is to try to figure out what the US looks like. We're on the heels of the UN week and also the Ryder Cup. I'm not sure which one was more chaotic, but as you look at the US's standing after the UN, what do you take from the events that took place last week? Richard Haass (00:02.744) on US FOREIGN POLICY Great to be back. THE US MOOD (AND THE RYDER CUP) Richard Haass (00:28.172) It was not a great week for what Joe and I, may he rest in peace, called soft power. What happened at Beth Page, the terrible manners, the coarseness, vulgarity, choose your word, the lack of sportsmanship, we could go on, but you get the point, was really poorly received in Europe, as it should have been. And I thought the PGA here just showed a blind spot would be generous. So it was not good. I felt somewhat between embarrassed and ashamed and also just overshadowed some unbelievable golf on both sides. Frazer Rice (01:11.069)Kind of where I came out on it. And it just felt bad watching some really good players doing their thing and then all of a sudden, again, overshadowed by pretty boorish behavior. Richard Haass (01:22.51) Particularly golf, because golf's a game of rules and norms. I think it was Rory Mclroy who used the word etiquette, and what we saw was anything but. I really wondered at times whether some of those people ever played golf. And then the UN. Look, it didn't happen in isolation. The President's US Foreign Policy speech was…at times just, it was seen, it was taken badly by Europeans. It was for understandable reasons, seen by them as something of an attack on them. The comments like about Sharia law in London were over the top. The criticism of immigration policy, some of which, for the record, deserve some criticism, I would say. The total denial of climate change was badly received. So it was not good, even though, and I think the president detracted for some of his legitimate criticisms of the UN. My own sense, though, is the UN's got bigger problems than Donald Trump's speech. The UN has basically made itself increasingly irrelevant. It's no longer a place for serious diplomacy. At most, it's a venue for side meetings. And since then, you've had the announcement of a "peace" plan for Gaza and so forth. So the world's moved on. quite honestly, what matters is not what happened during a few days of traffic in New York, but rather what happens more broadly. So we'll see what, if anything, comes of this Middle East announcement. We'll see what happens next, if anything, diplomatically with Ukraine. President Trump's about to meet his Chinese counterpart in less than a month in South Korea. So there's a lot going on. And not to mention domestically, there's a lot going on we can discuss. So the fact that the Ryder Cup or the UN were not great in and of themselves, they're more data points. And I think what matters is more the larger story for better and for worse. US Foreign Policy: Russia and the Ukraine Frazer Rice (03:32.339)As we just a couple of quick points to hit back on Ukraine Russia. What's the state of play in there right now? Richard Haass (03:41.71) Well, we're reaching the end of what you might call the third fighting season of this phase of the war, the one that started just over, mean, just under three years ago, in February of 22, if I have my dates right. My sense is things will dial down militarily somewhat during the winter, and then they'll dial up again early next year for a fourth fighting season. I don't believe diplomacy will gain traction until the United States does probably two things, puts much more economic pressure on Russia and gives Ukraine much more military wherewithal, both to withstand Russia and to take the war to Russia. Ultimately, diplomacy will only happen in a context where Vladimir Putin comes to the conclusion, however reluctantly, that time is not on his side. Right now, he believes time is on his side. He has no reason to compromise or settle. Only if we convince him. The time is not his friend, I believe. Will he agree to something like a ceasefire? I don't think we should be pushing for peace for any number of reasons. We can go into it if you want, but I don't think we need to. So at the moment, diplomacy is dependent on the calculations of the two sides, and I think the Ukrainian leadership is willing to accept a ceasefire in place, but the Russian leadership isn't. We've gotta change that calculation, and that's more than anything, I think, a function of whether we give Ukraine greater military help, which persuades Putin that more war will not give him more results. Frazer Rice (05:15.571)Any inside baseball and any potential weaknesses in Russia that we don't hear about over here, as opposed to sort of the general posturing we get from Putin? Richard Haass (05:25.389) There's been a lot of talk about it recently. The president mused on true social, about Russia's economy and so forth. Look, Russia's paid an enormous price for the war in terms of manpower, in terms of its economy. But China continues to buy oil, India continues to buy oil, Turkey continues to buy oil. So think the Russian economy limps along. Militarily, they've got a pretty good wartime economy. Putin still controls the narrative within Russia. I don't sense, I'd love to be wrong, but I don't sense that Russia's on any brink where it can't sustain a version of what it is doing. So no, no, could we reach a point, phrase it like that, is no longer true, and Russia, literally and figuratively, begins to run out of gas? Yeah. But I don't think we're there yet, but time, the medium to long term is not in Russia's favor, only because their productive capabilities are getting diminished and so forth. again, I still think what we want to do is help Ukraine more. don't know if we will. I don't know if we're going to impose sanctions. can't explain why this reluctance to pressure Russia directly and indirectly. It gets into places I don't have any evidence on. But I would simply say…President Trump is right to want to bring peace. I think he's sabotaging or undermining his own US Foreign Policy efforts by not creating a context in which diplomacy is more likely to succeed. But I don't see any signs at the moment that either side is ready to essentially shout uncle. US FOREIGN POLICY: ISRAEL AND GAZA Frazer Rice (07:10.163)Trump just came out with his 10 or 20 point plan for Israel and Gaza to Richard Haass (07:15.373)It was to inflationary times. It was 20. Frazer Rice (07:18.951)It's power of compounding. Hopefully, maybe that'll help. What do you make of that? We've just had all sorts of different iterations of from the invasion to the counter invasion to all the fighting. on one hand, I'm happy to see that there's an attempt to try to stake out some peace plans here, but I'm not confident that it will come to pass. Do you have any thoughts on that? Richard Haass (07:44.258) I pretty much agree with what you said. Look, it's the shortest 20-point plan in history. And by that, I mean there's 20 points to it, but none of them is fleshed out. So the immediate question is whether Hamas agrees to it, the Israeli government did. But even if Hamas does any number of implementation questions. Certain preconditions have to be met and so forth. When I used to teach at Harvard, we used to say that 90 % of life is implementation. Well, this plan is the 10%. It's a design. It includes all the things a peace plan would need to include, at least it mentions them. But they're not developed. And so all sorts of things to tall for a technocratic that could run Gaza, a stabilization force, full humanitarian aid, all sorts of things about political and diplomatic processes. The plan is more, I guess I'd say it's more aspirational than operational. So the good news is the Israeli government agreed to it. We'll see what Hamas does. My own guess is at some point, There'll be all sorts of hiccups in implementation. And probably early next year, in the spring or so, I expect Bibi Netanyahu will call for new elections. He's got to do it within the next 12, 13 months. He'll choose an opportune moment. The fact that he's gotten this plan put forward, which is quite sensitive, shall we say, to Israeli interests, and he's agreed to it, puts him in a very good position. So either Hamas…capitulates or Israel's given a green light to continue the war from the United States. So I think, my own view is this plan in its current form will not reach fruition to say the least. And at some point sooner rather than later, we'll probably have Israeli elections, possibly as soon as six, seven, eight months from now. CHINA AND INDA Frazer Rice (09:48.392)Got it. So it would be geopolitically crazy not to talk about the two most populous nations in China and India. I know they got together with Russia in the room as well to maybe to broadcast their sort of emergent standing in the world. Is there anything we should be watching on that front besides sort of the obvious in terms of how they deal with themselves and how they deal with US Foreign Policy, especially in a tariff environment? US FOREIGN POLICY: INDIA Richard Haass (10:16.279) Couple things come to mind, in terms of India. I think it's fair to accuse the administration of diplomatic malpractice. The U.S.

    32 min

  6. AUG 21

    TAX ALPHA

    In this conversation on "TAX ALPHA", Frazer Rice and BRENT SULLIVAN (of TAX ALPHA INSIDER) delve into the complexities of tax awareness in investing, focusing on capital gains, income tax, and various strategies for tax efficiency. They discuss the importance of tax loss harvesting, the challenges of managing concentrated portfolios, and the implications of estate planning. The conversation emphasizes the need for advisors and trustees to understand these strategies to optimize tax outcomes for their clients. https://youtu.be/pCIXFq4YoS0 Outline of Tax Alpha Quick Overview of Tax Rates Ordinary vs Capital Gain (Usually Income vs Asset based taxation) Short Term vs Long Term (Long Term Treatment) (we’ll talk about Estate Later) Federal vs State (Can be important!) Netting Losses/Deductions vs Gains and Income Owning assets Taxable vs Non-Taxable vehicles https://open.spotify.com/episode/3uL924aOlPd2hgmC9s7KCI?si=hBS09OKDTd-uHhT8PAj7aA Tax Alpha in stock investing (Universe) Long Only Concentrated Positions Timing – Getting LT Capital Gain treatment Basis – increasing basis Exchange / 351 Funds to defer and diversify Dramatic foreshadowing with step-up later in estate context Blind Trusts for political appointees Diversified Positions Passive (Lower Cost, acceptable returns, “lower risk/tracking error”) Active (Now frowned upon – except in the after tax world w/ TLH) Deferral Carve-Outs like QOZ’s Tax Lost Harvesting Owning an index vs owning a sample of the index Buying Coke and selling pepsi Wash Rules Loss Carry Forwards Capital Losses / Not Ordiany Losses Amplified Tax Loss Harvesting Own the sample of Index AND Borrow off those holdings to create long and short positions to generate capital losses while having beta of 1 Trends: Pre-Liquidity Event planning Storing Losses for the bulky sale Timing the event(s) to have the losses line up with the gains Pre-Diversification planning Pre Death Planning Integrating the Estate Planning with the Income/ Cap Gains Planning Step-Up Avoiding Estate Tax, But Prolonging the Cap Gains Tax exposure (and concentration risk?) Grantor Tax status and he swap power How does turbo charged loss creation look in an estate environment? Trustee/ Executor and Fiduciary / Beneficiary risk issues Vehicle evolution Funds SMA’s 351 and other ETF vehicles (+/-‘s) PPLI,PPVA How did you develop this expertise? How do we find you? Transcript of Tax Alpha Frazer Rice (00:01.122)Welcome aboard, Brent. Brent Sullivan (00:03.035)Well, happy to be here, Fraser. Frazer Rice (00:04.558)It's fun to chat in person. I've been following it to call a blog I don't think gives it the proper respect because I think you're uncovering a lot of great information for advisors like me and wealthy people and other people generally speaking in terms of Really getting going on the tax alpha end of it Let's start a little bit with some basics because I think you know for someone new to the concept of Being particularly tax aware in terms of investing taxes can be, they're more than just income tax, that's for sure. How do you think about it? How do you get your framework around what people are trying to avoid when they're dealing with their investable portfolios? Brent Sullivan (00:45.723)Yeah, I mean, there are really just a couple of different ways to break it down, but I probably start with the concept of a capital gain as a distinct thing from income tax. so capital gains come in really like four different flavors. There's short-term capital gains, short-term capital losses, and then long-term capital gains, long-term capital losses. And then these things are different if you have collectibles or other types of instruments too. But the point is here that you've got those four quadrants that you're always sort of operating in. And I think that's where the management and the prowess around portfolio design, execution, that's where all of that really comes into play. And the final point I'd make about capital gains versus income is that capital gains is really a planning opportunity. Income is gonna come at you and there's really not much you can do about it. Strong caveat to that. But capital gains are really about timing. You can accelerate losses, you can defer gains. Frazer Rice (01:37.929)Right. Brent Sullivan (01:45.079)And that's really the beginning of the conversation when I'm talking with advisors about this usually. I operate in B2B space, I'm not retail facing. And usually that's where the planning conversation starts. Frazer Rice (01:57.655)So as you sort of step back and help people think about the tax planning aspect of it, for advisors generally speaking, they're very interested not only in the investment perspective, but the structuring of wealth such that they're taking advantage of what they can and mitigating that which is destructive, but otherwise not really something they can avoid. If we settle in a little bit on the investment piece a little bit, what is the universe that we're looking in in terms of how people allocate their portfolios? Brent Sullivan (02:33.22)Well, mean, so probably I'd say the hot topic in tax management nowadays is really getting the portfolio to be more equity like. And so the reason or part of the motivation for more equity like exposure is to utilize to the extent possible the planning opportunity of capital gains, realization and acceleration and things like that. So that's that's probably the core concept. The biggest chunk of the investable portfolio. The idea is to make it more equity like. And then the planning opportunities sort of expand beyond the core portfolio. That's in, you know, how can we align total diversified exposure across the right types of investment accounts? In your space, it starts to get really interesting. You know, I say your space, like in a state planning world, it starts to get, you know, the idea of asset location, putting the stocks, you know, in the high growth portfolios or tax exempt portfolios, depending on the profile. Frazer Rice (03:17.228)Sure. Brent Sullivan (03:26.458)Putting the bonds in tax advantaged accounts or tax exempt accounts, again, depending on the profile. All of that is like, these are like really crisp, interesting planning questions that do not have crisp answers. And I think that's where the planning opportunity really emerges. Frazer Rice (03:42.668)We talk a little bit about asset location. The investment vehicles we'll talk about shortly and some of the things that can happen to turn the dials on that front. But in terms of location in whether ERISA accounts or life insurance or trusts or things like that, as people are trying to get their arms around the matrix, as you called it, and certainly with the capital gains and short and long, there's almost a matrix of different things you can think about in terms of the tools in your toolkit. How do you get your arms around that if you're new to the space or otherwise trying to really provide subtle advice as opposed to maybe speculative advice? Brent Sullivan (04:23.214)Yeah, I mean, I think that the first step is really trying to understand how each investment decision impacts not just the current investment returns, but also future investment returns, after-tax returns, pre-liquidation, post-liquidation, but then also estate considerations, like are you choosing the right vehicle if you're trying to isolate or exclude assets from the estate? Do you want to keep a strategy on for multi-generations? Is it private? Public? Is it liquid? Iliquid? Inflation protected? All this kind of stuff. You have to realize that every single investment decision involves or impacts this really complex ecosystem. It's super interesting, but I think like first order decision is like how much of a thing should I own? That is just like the tip of the iceberg. And I would say that's where 99 % of like the financial media focuses. You how should I invest a million dollars now? It's like, no, boy. Like there's so much more ground to cover that could make portfolios resilient today, but also with multi-generation in mind. Frazer Rice (05:29.835)As I like to say, trying to get past the two dimensions that most people are normally thinking about in terms of the X and Y of income and capital gains and then sort of layering on asset allocation to be responsible on that front, but then add the Z axis of the estate planning, really kind of years 10, 15, 20, and then going beyond your use of the assets to different constituencies that are going to benefit from it later. Brent Sullivan (05:55.365)I mean, I get so excited when I think about the opportunities in this space because they're so messy and bespoke. And I say messy in a good way. These are real problems that planners have an opportunity to step in and address for high net worth folks. really, down market, I don't say down market in a pejorative sense, but mean, in down market too, there are really opportunities for planners to step in and add meaningful value and like again, I am an observer of this industry. I'm an independent tax analyst, which means that I don't have a stake in the game. I don't, I'm not trying to sell anyone's product. So I just get to see the opportunities that planners have when they're engaging with, with clients at all wealth levels. And again, like to your point, yeah, multi-generation is super exciting. It's so messy and interesting. Frazer Rice (06:43.755)As we look at it here, the one unifying theme is most people don't want to pay taxes if they don't have to. success really does come down to what do you get to keep at the end of the day from the fruits of your labor or your investment. Without that unifying principle, then we're sort of grasping at st

    41 min

  7. AUG 11

    WELL BEING TRUST

    In this conversation, Frazer Rice and PAUL HOOD delve into the evolving role of trustees, particularly in the context of Delaware's new Well-Being Trust Statute. They discuss the broader responsibilities of trustees beyond mere asset management, emphasizing the importance of understanding beneficiaries' needs and the implications of well-being provisions. The dialogue highlights the challenges trustees face in balancing the interests of multiple beneficiaries, the potential liabilities associated with well-being services, and the necessity of having clear processes in place. The conversation concludes with reflections on the complexities of trust management and the importance of careful drafting in trust documents. https://youtu.be/9LFt6HsjpWM https://open.spotify.com/episode/4uqhoeXtfaIIWLbKhd62ej?si=nDTf-09bRSWjT0O_YKX49g Takeaways Trustees have a broader role than just managing assets. The well-being statute in Delaware is an opt-in provision. Balancing the needs of multiple beneficiaries is challenging. A clear process is essential for trustees to navigate their duties. Well-being provisions can complicate traditional trust structures. Trustees must be cautious about the liabilities they assume. Decanting trusts can lead to unintended consequences. The intent of the settlor is paramount in trust management. Trustees should document their decision-making processes. Effective communication with beneficiaries is crucial. Sound bites "I would never opt into 3345.""Decanting is not that easy." Well Being Trust Chapters 00:00 Understanding the Role of Trustees04:45 The Concept of Well-Being in Trusts10:33 Balancing Beneficiary Needs17:53 Navigating Well-Being Responsibilities24:30 Challenges and Considerations in Trust Management Well Being Trust Transcript Frazer Rice (00:01.078)Welcome aboard, Pop. Paul Hood (00:02.648)Great to be with you today. Frazer Rice (00:04.598)The Delaware legislature has tried to give us some new tools to give us a holistic approach to planning for trustees and for beneficiaries. Help us sort of think through first from a function perspective what trustees do. I always thought of it as, you know, they held assets for the benefit of beneficiaries and then with that they have to administer them, they have to invest them, and then they have to distribute them. Have we got that about right? Paul Hood (00:35.34)Well, I've always had a broader view of trustees. Jay Hughes, a good friend and fellow pilgrim in this field, he talks about the trustee as a persons with confidence and like a trainer, an elder, and for a lot of beneficiaries, and I believe trustees, especially in discretionary trusts, The trustee needs to be that. There needs to be some attention to the person of the beneficiary, not just the finances. Send us a budget. The distributions committee who's in secret will meet, and we'll decide how much we'll give you. Well, I think a trustee's duty is broader than that. Or let's say this, you can meet the minimum requirements of being a trustee by doing what you said, but I think the very, very best trustees are persons with confidence. Frazer Rice (01:41.17)I agree with that. The problem is identifying the people who mix the temperament and the talent and then paying for them. So to that end, with those different functions, the world of bifurcation came about. Directed trustees where people got to be good at certain things. Maybe you had a good investment person, you had someone who was with the family who understood the dynamics from a distribution standpoint. and then the administrative side making sure the I's are dotted and the T's are crossed as far as the administration's concern. How do you view that in the evolution of the trustee function? Paul Hood (02:17.612)Well, it's interesting because I haven't been in practice. since well the 20th anniversary of Hurricane Katrina is August 29th of this year. My life changed that day. I didn't know it but it did. And I left Louisiana. So I haven't practiced law in 20 years but I remember the directed trust percolating up and it was driven by the investments. People wanted the bank trust or the institutional trustees but they hated their investment performance. So the compromise was, okay, we'll reduce our duties because the bugaboo was always whether it was a proper delegation of investment authority. The trustee could still be held liable for what if the court thought it was an improper delegation, okay, or oversight of the delegation. They started out investing right, but then they got real heavy in crypto and foreign flips. you can go there. So we'll take fewer basis points, but we don't have the liability for that. That liability is not delegated. We have segregated it. But enter the Wellbeing Trust, and this is only true in Delaware in the Wellbeing Trust statute because it's an opt-in. Once you opt-in, you are required, the trustee and all the advisors are required to perform that those well-being, provide those well-being services. Now the question is who is responsible for providing them. Frazer Rice (04:16.891)Let's step back for a second. The well-being provision, which is designed to give the trustee the tool to promote, improve, advance the well-being of the beneficiaries, which I think we can agree is a good thing in concept. What do we think of well-being as being? How is it defined? And what part of the function is it taking from the trustee's perspective? Paul Hood (04:45.228)Well, I'm going to default back to, I think it was Potter Stewart who said he knows pornography when he sees it. I think that's the same with well-being. I think things are either obviously well-being related and are not. And there's a continuum of them. But the whole concept, I think it's just pretty much to promote the betterment, the improvement and the just the the maintenance personal maintenance of a trustee i mean of a a beneficiary Frazer Rice (05:26.269)So how do you think about it from a trustee's perspective when there are multiple beneficiaries and maybe the wellbeing for one is not the wellbeing for another? Very often a trustee has to balance a lot of different equities and I don't mean that from a stock perspective, sort of taking care of one possibly at the expense of the other with the trust's assets. How does the new statute in Delaware address that? Paul Hood (05:54.222)Well, and you raise an excellent point. what you said, you were talking about equities, okay? What it really is, is the trustees duties. And the big one is the duty of impartiality. And arguably, the 3345 statute, and I'll call it that, that's the wellbeing statute. That's the opt-in. They have another one and it is to provide, it's an immediate power. It was added to 3325 as number 32 in the Delaware trust code. And it allows almost the same things. It empowers trustees, now not the advisors. It doesn't say anything about the advisors in that statute. Whereas 3345 includes, and remember in Delaware an advisor is like the trust protector and the administrative trustee, that kind of thing. They call them advisors. I don't favor that language because I believe that they should all be fiduciaries. So I call them trustees because I think in the end they're going to be held, especially if they're professionals, they're going to be held to that standard as it is. But that statute was immediate when the law went into effect. So they're authorized to provide those services now. For me, would provide, I would never opt into that statute. Because why do you want to take on a mandatory duty that's unclear? Frazer Rice (07:30.12)That's it. Frazer Rice (07:34.908)Yeah, it sounds like a Roach Motel where you get in but you can't leave. That's right. That's right. So if you were to encounter one of these trusts in the wild and you've got multiple beneficiaries, but let's say three, one of them needs a lot of help. Another one could use the help and then the other one is completely self-sufficient. How do you… Paul Hood (07:40.35)Eagles Hotel, California. You can check out anytime you like, but you can never leave. Frazer Rice (08:02.693)sort of build a process around that so that you are being impartial but you are invariably taking away from potentially the corpus of the trust in order to effectuate different goals as they develop for these beneficiaries. Paul Hood (08:16.782)Well, it obviously starts with the settlors intent. And it's the settlors intent first as set forth in the instrument. However, because this is not a court case where you're construing, because I I used be an expert witness, know, construing, you know, problematic clauses in operating agreements, trusts, wills, whatever. You, you, you, you construe that including more information you investigate. The trustee, let's look more, because you look at the language and well it would authorize it here, but let me find out a little bit more. If the settlor is still alive, I would at a minimum also talk to the settlor, okay? Also, if he or she is not still alive or sentient, I would investigate. I would talk to other people. I would make that into a process so that when you're questioned down the road, here's my process. Anytime you have a process, you're better off. When all that planning was done in 2012, you know, and we filed more gift tax returns. I was the only guy in the country saying, don't. put your marginal wealth clients into anything big, irrevocable. I said, because I think this is gonna work itself out. And for six hours, I was wrong on January the 1st, 2013, but there were lawsuits. And Jackson versus Colon was one of the cases and poor Colon, the lawyer got sued. because he didn't have a process for evaluating whether his client had put too much or had retained sufficient assets after they did this planning. So it's all about a process in the end

    30 min

  8. AUG 4

    INSIDE THE BEZOS PRE-NUP

    We go inside the the enormity, complication, and notoriety of the BEZOS PRE-NUP AGREEMENT with divorce attorney, MARILYN CHINITZ of BLANK ROME. https://youtu.be/nMMp6He056Y https://open.spotify.com/episode/39KMPMRhwGfYbdZVMJHEan?si=36c5c8a927bf4a6f Outline of the ISSUES INSIDE the BEZOS PRE-NUP General Concepts What happens without a pre-nup? Process for disclosing assets Previous marriages and those pre/post-nups? Community vs Equitable Distribution (Does the Pre-Nup contract this away?) Separate property Outside trusts?  Estate Planning? Pre-nup vs ultra high net worth pre-nup Financial Considerations (and Complication) Non-Financial- NDA, media activity, scope of negotiations, data and tech issues Let's go through the General Fact Pattern High Profile Asymmetric Net Worths Kids? Which state is used for choice of law? Portability?  How do you make sure this has teeth?  (Coercion penalties) Spousal support / alimony? Escalator or sunset clauses? Disqualifying or  "infidelity" or "weight gain" clauses? What happens if children? Other constituencies - charities, businesses, political causes etc  Integration with estate documents, life insurance, other vehicles Is there a check-in every five years? What else can we learn from what is inside the Bezos Pre-Nup? Transcript Frazer Rice (00:02.07) - Inside the Bezos Pre-Nup Welcome aboard, Marilyn. Marilyn Chinitz (00:04.088) Thank you, really nice to be here and nice to talk to you about what's inside the Bezos Pre-Nup. Frazer Rice (00:07.541) We sort of regaled ourselves with a mutual friend and we're already, I feel like we're already related. That's right. So we're going to talk a little bit about probably one of the highest profile marriages in the world that just happened with the Bezos Sanchez union and get inside the Bezos pre-Nup. But for just for a little bit here, let's talk about what happens in a sort of family law divorce setting. Marilyn Chinitz (00:13.39) Your best and glorious buddies are ready. Frazer Rice (00:35.232) With general concepts because we're going to be diving into some specifics with the case study here. What happens when something goes wrong and we have a divorce that happens without a prenup? Marilyn Chinitz (00:46.734) So it depends what state you're in. If you're in a state like New York, then we have equitable distribution laws. If you're in a state like community property in California, then those laws are very different. So if you have no prenup, and a lot of people don't because they start their marriage with very little assets, and everything that you acquired during your marriage is now subject to a division. Frazer Rice (00:49.569) Of course. Marilyn Chinitz (01:15.918) And what happens is you start to trace the assets and you look at, what do I have? You look at homes that you purchase, real estate that you purchase, stocks, securities that you purchased. It doesn't matter in whose name the asset is held. It's a marital asset if it was acquired during the marriage and it was not gifted or inherited. If you come into the marriage with assets and you have no prenuptial agreement and you keep those separate property assets clean, and I'll explain what that means. When they go up in value because you actively caused their appreciation, they may be subject to a marital claim, the appreciation aspect. If you… have an asset that went up in value because of passive reasons and you kept that asset separate, it will remain separate property. So let's talk about an example. If I owned a building before I got married and that building was worth five million dollars and then I get married and years later I get divorced, that building is now worth twenty million dollars. It appreciated by 15 million. Did it appreciate because of market fluctuation, because the market went up, real estate did better? Or did it appreciate in value because I managed it, I collected the rent, I made sure the repairs were done, I made renovations to the building, and therefore it went up in value. If it went up in value during the marriage because I actively did something, I renovated, I took care of the building, I managed the building. That appreciation from five million to 20 million is gonna be considered marital. Then the question is, what percentage does the other spouse get? Do they get 10 % of the appreciation or 50 % of the appreciation? If that asset went up because of market fluctuation, I sat back, I did nothing, the market went sky high. Marilyn Chinitz (03:38.905) Then that property will remain separate property and the appreciation is separate. So you have to look at those different factors. But other than that, if you come into the marriage with no assets and you create a marital estate and you have no pre-nup, that marital estate is going to be divided. Now the question is, how is it going to be divided? If you're in an equitable distribution state, Frazer Rice (04:04.907) Right. Marilyn Chinitz (04:08.718) What does that mean? It means what a particular judge feels in a particular courtroom on a particular day. What does equitable mean? It's completely subjective. So did the other spouse take care of two, three children while you were managing that property? Did the other spouse work but supported you? Or did the other spouse do their own thing and had no real contribution? It's very fact specific. And if you can show that the spouse really contributed in a meaningful way while you were running your business or running your properties, I took care of the children, I took care of the home, I took care of you, then the court is likely to give you a more substantial percentage interest of that appreciation. And in New York, for example, equitable, and then we'll talk about community, California, for example, generally, Bank accounts, retirement accounts, stock security accounts are going to be divided pretty much 50-50. Where the court will not give 50-50 is if it's a business. And then the court can go anywhere from 10%, 15%, 20%, up to maybe 40 % in unusual cases. What do those cases look like? They work together in the business. They took care of things together. It's very unusual for a court to give 40 % interest to the non-working spouse unless they were really actively involved in the business. Now, conversely, take California, which is a community property. When you get married and you acquire property in California, that's 50-50 off the bat. Now, why does that become really important? We're seeing a lot of cases where people have really created a lot of wealth in their marriage and they are correctly and smartly putting some of that wealth into trust. They're gifting it to a trust for their children. New York, for example, is a title state. A title state means if I own the asset during my marriage, I can sell it, I can gift it, I can do whatever I want with it. Marilyn Chinitz (06:33.718) As long as there's no divorce. If you are in a community property state, you can't do that because that person, that spouse already owns 50%. It's almost jointly owned. So you can't give away a marital asset unless you consult with me, your spouse, unless you ask me, is it okay? So in New York, if I wanted to take an asset, an interest that I own during the marriage, it's a marital asset, but because there's no divorce, there's nothing that prohibits me, I gift it to a trust, I have the right to do that. In California, I may not have the right to do that unless I got my spouse's consent. So, number one, what's critically important is you need to know what the laws are in the different states. Now, Sometimes people get married. They get married in New York. They enter into a prenuptial agreement in New York. But now they move to California that has very different laws. And if they thought they were going to move to California, then you want to make sure as a New York lawyer to advise the client, we need to engage California counsel. We need to find out what their laws are so that your prenup is portable, it could be enforced in a different jurisdiction. Frazer Rice (08:03.559)So choice of law, obviously very important. Then I would say sort of the process and hygiene around using assets and deciding what happens jointly versus what stays separate is something that's important to manage going forward. How do you think about that with clients? Marilyn Chinitz (08:20.346)So, I mean, interestingly enough, when I do a, let's talk about prenups for a minute. Because when I do a prenup for a client, we have a check-in every year. We go to lunch. We talk about what changes, what's going on. Does the agreement need to be modified? So many times people will sign a prenuptial agreement, they put it away, they don't even know where they put it. And 20 years later, sadly, somebody triggered. the terms of that agreement. Now they pull it out and they go, my God, everything's changed. When we signed that agreement, he was only worth X amount. He's now 20 times wealthier, but I didn't increase anything. That's not fair. If the agreement is…an agreement that you entered into with the advice of counsel. If the agreement had full financial disclosure, if the agreement was negotiated, if you had your own counsel, etc., all the bells and whistles, it may be an unfair agreement, but it's going to be enforceable unless it is unconscionable. So what does unconscionable mean? Unconscionable means shocking to the conscience. So I represented, and I could say it because it was in the media, Liba Icahn, married to Carl Icahn. And he had a prenuptial agreement prepared, and she signed it. Years later, he decided he wanted a divorce. And she argued to the court, I was not her first lawyer. I was not her second lawyer, I was her third lawyer.

    33 min
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About

Covering the issues that affect business, entrepreneurship, wealth, trusteeship and culture.

Information

  • Creator
    Frazer Rice
  • Years Active
    2015 - 2025
  • Episodes
    193
  • Rating
    Clean
  • Show Website
    Wealth Actually

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