Wealth Transfer Risks and Legacy

Legacy & Wealth Transfer Risks that Can Cost You Big, with Ron Phillips

Want to know what happens to your real estate portfolio after you’re gone? In this episode, we’re talking with Ron Phillips—CEO of RP Capital, a real estate brokerage—about his client who passed away. It turns out, his family didn’t even know what assets he had, or what to do with them, and it almost cost them a fortune in taxes. Tune in to hear what hoops they had to jump through, and how to avoid the same wealth transfer risks, so you and your family can be much better prepared. 

In this episode with Ron Phillips, you’ll learn:

  • The importance of managing your mindset in life
  • The costs of not preparing and communicating your legacy well
  • How to ensure your assets do the most good for your family even after you’re gone
  • Why it’s crucial that your heirs know what you have
  • The wealth transfer risks of putting off your estate planning
  • How to make leaders in business and in your family

Where Legacy Fits In The Bigger Picture

Creating a legacy is the capstone of a life well-lived.  It’s the end goal of a life and business you love, and the greatest mission of our lives.  But we need an entire financial system to support our ability to do the most good.

Legacy Creation

That’s why we’ve put together the 3-step Entrepreneur’s Cash Flow System.  

The first step is keeping more of the money you make.  This includes tax planning, debt restructuring, cash flow awareness, and restructuring your savings so you can access it as an emergency/opportunity fund.  This step frees up and increases your cash flow, so you have more to save, and consequently, more to invest.

Then, you’ll protect your money with privatized banking, insurance, and legal protection.  

Finally, you’ll put your money to work and get it to make more by investing in cash-flowing assets to build time and money freedom and leave a rich legacy.

Legacy & Wealth Transfer Risks, Conversation Highlights from Ron Phillips

How Mindset Affects Your Real Estate Deals

Once you figure out how to help others, you’ll begin to reap benefits in your own life. You’ve likely heard, “If you help enough people get what they want, you’ll get what you want.” In practice, you often get 10x that!

(7:40) When Ron’s deal was rejected, he felt destroyed. Yet he woke up the next day, he reflected on what he had learned and studied. He knew as long as he could solve the problem at hand, he could make a worthwhile deal. Then, he ended up launching his career, which has only continued in its success.  

(10:05) Real estate, life business, relationships—everything throws wrenches into your world. Nothing goes the way it’s supposed to, all the time. You have two choices in how you proceed. You can think that the world is against you, and that you can’t win, or you can figure out a way through it. 

Ron’s Real Estate Business

(12:38) Until 2005, Ron was in the business of rehabbing houses, until HUD changed the guidelines. So he “went out of business” virtually overnight. He essentially became a landlord, though it was not his goal. So Ron adapted.

What he discovered was, many people don’t want to be landlords (much like himself). Though they do have an interest in real estate. Ron had the teams and the know-how, and now he helps other people find success when they lack the right resources. This started before turnkey operators were really a thing. However Ron resists the urge to describe his business as a turnkey operation. 

(20:20) … people think when something is turnkey that they don’t have to do anything. It’s not that the property isn’t ready to go, or that the property doesn’t have a tenant in it. All of that is true. But turnkey just gives this feeling of, “I don’t have to check my bank account because this thing is going to just magically happen.” And that’s just not how real estate works. It’s not how anything works. 

Playing to Win

(23:30) If you want to play the money game to win, you must move your assets according to what the markets are telling you. Enjoy your market in its prime, and then move when the winds change. You increase your income, cash out, and do it again.

If you wait around in one market, watching it go up and down like so many do, you stunt your growth. Your exponential power lies in the ability to watch multiple markets and shift your assets for growth.

The power behind this strategy is that if you have capital and you’re looking to have an additional source of income, you can do it while you work.

(24:45) And once somebody gets to this point, there are all these really cool layers you can add. If you can take your income and then dump it into your own bank through cash value life insurance, you’re now double arbitraging your money, and the engine just goes faster. Yet it means nothing if you don’t have an estate plan that negates wealth transfer risks.

Ron’s Clients

When you build your legacy, what happens when you pass away? How do you make sure that the goals that you have and the life you choose to have continue through your legacy? 

(30:33) Recently, two people that Ron worked closely with passed away. The first was a lender his company had done hundreds of deals with him. He was a young guy, with young kids, and he was an integral part of their team. 

No one really expects to pass on young, but it is critical to have to plan that mitigates wealth transfer risks, should it happen. The last thing you want is for your legacy to be a problem for your loved ones. And if you don’t plan for this event, you’re more likely to leave a financial mess—especially if you have significant assets. 

Wealth Transfer Risks

The other death was a long-term client, and one of Ron’s earliest clients. He died with a significant net worth, leaving his family clueless about the small empire he built. In fact, his wife wasn’t in a capacity to be handling the financials. And the reason Ron caught this was because they were in the middle of a 1031 exchange, so he reached out to the kids to discuss the next steps.

The client told Ron all the time that he had invested for his grandchildren. His investments were providing monthly cash flow.

But, his kids wanted to sell and be done with it because they didn’t know what they inherited. They had no concept of the scope of what they were given.

If you don’t provide specifications, your heirs will do what they want or think is best, even if it’s not best.

That’s why it’s not a good idea to keep your assets quiet from your family because you run the risk of your legacy disappearing (despite your intention).

Wills and Probate

Often, people believe they’re fully protected because they have a will in place. Yet there are other crucial aspects of a sound estate plan.

Trusts are a crucial element. And trusts are not as expensive as you’d think. What you don’t want is for your will to be contested after you pass because you hadn’t communicated your plan effectively. 

Anyone can contest a will, and then it must go to probate. And then probate lawyers receive a portion of the estate. In order to divide an estate, assets must be liquidated. That means the impact of your legacy plan will be minimized or rendered null.

If you don’t have a legacy plan, yet you’re investing and accumulating assets, consider what you really want from your assets. What is the point of working so hard if you don’t have an idea of what you want? 

What is a Legacy?

One scenario, without properly communicated plans, is that your wealth disappears. Say your heirs do sell everything in a fire sale, and distribute the money. It dries up at rapid speed because your heirs aren’t invested in the process of wealth creation. If they were kept in the dark, they will lack the know-how to continue your legacy. This is the largest wealth transfer risk you run, by not planning your estate.

When you have a wealth creator on one hand, and they don’t transfer that knowledge along with the assets, the heirs don’t have the knowledge to be good stewards of that money. 

If you do not pass on your knowledge, your legacy will not continue. In business, if you do not create leaders, you’re not a leader yourself. It’s the same within your family. If you hoard and keep secrets about your assets, yet intend to pass them on, then you’re setting your legacy and your family up for failure.  

Wealth comes from creation, it’s not something you just have. If you can’t teach others to be creators, your legacy of wealth stops with you. 

We don’t get to take our wealth with us when we pass. It will either benefit the people we love when we’re gone, or it won’t. The proper channels make your legacy a reality. 

Who is Ron Philips?

Ron Phillips is a leader among leaders… a trainer, coach, and mentor in the real estate investment world. He has an unstoppable passion for helping busy professionals & and business owners increase their income and net worth, and play the real estate investment game and WIN.

Ron is the Founder and CEO of RP Capital ‒ a Real Estate Brokerage specializing in residential income-producing properties. More than a brokerage, RP Capital is Ron’s platform for educating, training, and empowering emerging and seasoned investors. Ranked in the top 25% on the INC 5000 list of America’s Fastest-Growing Companies in 2015, the firm offers a proprietary software suite so its clients can create their own Real Estate Wealth Plan(TM) using live inventory and produce a proforma for those properties, then his team walks them through the process of becoming an investor.  70% of these clients continue to do business with RP Capital. 

Want to Talk About Family Banking with Whole Life Insurance?

Family banking with whole life insurance is a powerful and profound way to build, preserve, and maintain family wealth. 

To implement Infinite Banking, alternative investments, or passive cash flow strategies to keep more of the money you make, book your strategy call with The Money Advantage advisors today.

Thanks for Tuning In!

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Thanks for listening!

Rachel Marshall

Rachel Marshall

Rachel Marshall is the Co-Founder and Chief Financial Educator of The Money Advantage. She is known for making money simple, fun, and doable. Rachel helps her clients create time and money freedom with cash flow strategies, Privatized Banking, and alternative investments. Rachel is the co-host of The Money Advantage podcast, the popular business and personal finance show. She teaches how to keep more of the money you make, protect it, and turn it into cash-flowing assets.
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