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Most people think wealth transfer is something only billionaires need to plan for. But the biggest mistake wealthy families make is waiting until they have “enough” before setting up the systems that protect and grow their wealth for generations.
In this episode, Sharran completes his Tax Advantage Matrix series by breaking down Level Three: Transferring wealth strategically. While the first two levels focus on reducing taxes today and designing the right financial structure, this final level focuses on moving wealth from one generation to the next in the most tax-efficient way.
This episode teaches you why the wealthy consider estate planning before they need it, how ownership changes financial behavior, and why building the right systems today can create a lasting legacy for their families.
Listen to Part 1: Lower Your Taxes Legally – https://sharran.com/episode321/
Listen to Part 2: Lower Your Taxes Legally – https://sharran.com/episode322/
“If something is small today and could get big later, you want to look at it early because if you look at it late, it’s too late.”
– Sharran Srivatsaa
Timestamps:
01:27 – Introduction to the Tax Advantage Matrix
02:21 – Why wealth transfer planning should start before you have massive wealth
05:12 – Freezing wealth: Locking today’s value and transferring future growth
07:25 – Giving wealth strategically during your lifetime
10:34 – Skipping wealth across generations with trusts and family systems
12:05 – Why liquidity matters in estate planning
12:58 – Recap: Part 3: Lower Your Taxes Legally
Resources:
– The Next Billion by Sharran Srivatsaa
– Board Member: ARC Multifamily Real Estate Investing
– Board Member: The Real Brokerage
Connect with Sharran:
– X
– YouTube
– Threads
Transcript:
[00:00:00] Hey, this is Sharran Srivatsaa. Welcome back to The Business School podcast, and this is episode three of How to Lower Your Taxes. So if you’ve not listened to episode one or two, that may be helpful, but you can also start right here. And I’m talking about how do you pay less taxes. And there is a strategy here.
[00:00:12] When you layer on level one, level two, and level three, you can be extremely bulletproof, and this is level three of this, what I call the tax advantage matrix. I’m gonna break it all down step by step starting right now
[00:00:29] One thing is for certain: just because it’s tried and true doesn’t mean it’s working right now. So the big question is this: Where can you learn what is working right now? The strategies, the tactics, the psychology, and the exact how-to. How to grow your business, how to blow up your personal brand, and supercharge your personal growth.
[00:00:51] That is the question, and this podcast will give you the answer. My name is Sharran Srivatsaa, and welcome to Business School.
[00:01:04] All right, this is, uh, episode three of the How to Lower Your Taxes series. If you’ve not listened to episode one or two, it may be helpful to you, but I can… You can listen to this and then scoot back and listen to that if you’d like. But if you’re jumping in here first, no problem. I wanna give you, like, the full map overall.
[00:01:20] So many years ago, I realized that taxes were the number one drag on wealth creation, so I decided to figure out, like, how do I actually do better? I almost thought that even if I made no money investing, if I did not change my income, how would I be able to keep more of what I make? And I came up with an entire matrix to help myself in this process.
[00:01:38] This is called the tax advantage matrix. It has three levels. Level number one is to lower your tax bill, and that is: how do you lower this year’s income? It has three pieces. How do you get deductions? How do you figure out the incentives? And how do you figure out the timing? Level number two is, as your business starts to grow or as your life starts to grow, you have to design a structure because these are all one-time things that you can do on how money flows through the pipes.
[00:01:57] And if you get the entities right, the classification right, and the location right, it makes things significantly easier, and it doesn’t actually take a lot of time. It just only… You have to do it one time. The third is: how do you transfer the wealth? You may say, “Well, Satchin, I don’t have the wealth right now.”
[00:02:08] Well, it’s not about having the wealth. It’s about getting your setup right so that everything can work in your favor over time. And that is: how do you move wealth from yourself to yourself in the most tax-advantaged way? And that is, it’s got three things that I’m gonna talk about today, which is the freezing, the giving, and the skipping.
[00:02:21] This feels- this level three will feel far away for a lot of you and, and for me as well, but once you get there, you’re gonna be like, “Oh, crap, I sh- wish I’d have done this sooner,” because if you do it now, it’s significantly easier. I always use this example of, like, if you’re building plumbing in your house, you want to build…
[00:02:36] You may say, “Well, I don’t, I don’t need hot water,” but if you don’t build it, the, the plumbing infrastructure, you can’t send money through the, like water through the pipes. And this is one of those. If you just set it right up, set it up right once the first time, everything gets significantly easier. I recognize you may not need all of this today, but if you don’t need– But if you set, you can– But if you set it all up right today, it will cost you almost nothing, and it will help you in almost every single way.
[00:02:59] But if you own a business, if you have real estate, if you have private company stock, if you own your own– If you’re o- if you’re an entrepreneur, if you have life insurance, if you have a, if you have, uh, concentrated public stock, if you have mutual funds, 401s, assets that grow, you need to understand this map.
[00:03:11] Because some of this works best only when the numbers get huge, but the funny part is people wait when it gets too big, and when it gets too big, you can’t really do any of these things. And that’s why this gets really difficult. And that’s when everything is super complex, and that’s when you can’t figure out a lot of these things.
[00:03:24] So I highly, highly recommend that you, like, figure this out right now, because once you figure this out right now, things get a lot easier. All right, this is what level three means. I’m talking about how money moves to the next, to yourself or the next generation in the most tax-advantaged way. And this is longer, no longer about income tax.
[00:03:39] I try really hard to have the lowest possible income tax. If you told me, I would be, I would try to, like, zero out my income completely. But now you’re talking about estate tax, gift tax, generation-skipping tax, uh, liquidity, control, family rules, all of that. And it doesn’t need to be only if you’re the Waltons or the Vanderbilts or the Rockefellers or the Musks.
[00:03:55] You- if you do it right for yourself, it’ll benefit your entire family, and you will actually make more money just because you did this entire system. So let me break it down for you, make it really simple. This kind of has three things that you need to think about. Number one, how to freeze. Number two, how to give.
[00:04:07] Number three, how to skip. So let me explain what that means. Freezing locks today’s value. Now, why would you want to lock today’s value? Because if you lock, if you have 100 shares of Apple and you lock it at today’s value, and let’s say Apple grows 500% in the next five years, you’re not taxed on the growth of that.
[00:04:24] That’s why this is important. Giving moves your assets during your life. It’s not that you have to give to charity. It says you have to give in such a way that you can get stuff out of your estate but still keep all the benefits for it. And the third is skipping. Skipping passes wealth beyond one generation or skipping passes stuff to yourself without actually getting stuck, because now it allows you to do both control and tax-efficient transfers.
[00:04:43] You have to know all of these things to actually do the thing, otherwise you just end up accumulating a lot of stuff, and then you pay a lot of taxes, and you’re like, “Man, this sucks.” So freezing, let me explain. Freezing locks today’s value in some way. Giving moves assets during your life to yourself and others.
[00:04:57] And skipping passes the wealth beyond generations and at least sets it up for you in your favor today while you are alive. And because different taxes hit different things at different points in your life, and that’s what we need to fix. All right, so let’s, let’s– Let me actually give you an example. The first one is the freezing.
[00:05:12] Freezing locks today’s value, meaning if you own something that may grow a lot, the question becomes: who should own that future growth? Do you s- tax the seed or do you tax the harvest? That’s the whole idea. And lots of examples that in my tax advantage matrix are, uh, a GRAT, which is a Grantor Retained Annuity Trust, where you give a portion of your company away, but you still keep all the control.
[00:05:31] Or an Intentionally Defective Grantor Trust, where you essentially set up a trust in such a way that it breaks, and then all the benefits go to whoever you set this up for. An installment sale. An installment sale is really good because it says, “Hey, I’m only gonna sell this in pieces,” and the only taxable tax that is realized is in pieces.
[00:05:47] A dynasty trust. This, what this does is it say, “Hey, I’m gonna build this massive dynasty and then, but I’m not going to get taxed on it multiple times.” So I’ll give you an example. Probably that’s easier. Let’s talk about GRAT. A GRAT is a Grantor Retained Annuity Trust, and what this means is it’s a trust used to move Future growth.
[00:06:04] So let’s say your, your company, you have a startup today, and it’s worth $0 because you started it today. But you know it’s gonna… You think it’s gonna crush it. Well, if you took 1% of your startup and you place that 1% in, in, into, into the trust in your kids’ names, well, you’ve really transferred 1% of $0. And there’s nothing to pay you back.
[00:06:23] Maybe, maybe they pay you back one cent every year for the next 10 years because you gave them something that’s worth today. But since it’s, since you’ve already given it, and the asset now grows and your company now grows, all the growth that happened, it passes to your kids, the 1%, without any gift taxes.
[00:06:37] Otherwise, you would pay gift taxes on that. And so the, It’s a really simple question. I do this with my children all the time, is do I s- tax the seed or do I tax the harvest, right? Think about that. Do I tax the seed or do I tax the harvest? This is all about growth. If something is small today and could get big later, you want to look at this super early, because if you look at this late, it’s too late.
[00:06:53] Private company, like startups, real estate, like a pre-exit, like pre-IPO stock, any kind of fast-growing investment, if you think that, hey, this is gonna be worth a lot tomorrow, and all of that is important, and that’s why you talk about the freeze It’s important to talk to your attorney about this stuff because they…
[00:07:09] Which assets may grow the most? Where should those as- should you plan around it? Because it, it takes a little bit of planning, but once you set it up, you never have to worry about it again. And so a lot of times just freezing the value in which you transfer the asset itself is the, is the tax advantage in this process overall.
[00:07:24] All right. Big idea number two is to give. Giving actually moves assets during life, so meaning some wealth can move while you live, some wealth moves while you die. So I’ll give you a couple examples. There is something called annual gifting rules. There is something called lifetime exemption gifting rules.
[00:07:38] There’s, uh, 529 plan super funding rules. There’s direct payment of tuition and medical expenses. There’s donor-advised funds. There’s CRUTs and CLATs, and, uh, uh, it’s, 529 plans are very, uh, people understand what they are. You actually, used mainly for educational purposes. So let me give you an example of super funding a 529 plan, right?
[00:07:55] A 529 plan is used, uh, is used for mainly educational expenses for whoever [00:08:00] you designate it for. It can be you, your children, heirs, whatever. Super funding means putting several years of gifts in at once, and the money starts to grow for the educational cost. A lot of people are like, “I’ll do $200 a year for the next 20 years.”
[00:08:11] Or let’s say you got a big bonus, you can super fund that amount, and that money can grow faster for all the education costs. I’ll tell you how I think about it. Every time the markets drop, like in 2008, the global financial crisis, and then during the COVID crisis, both of those times when the markets dropped, I super funded the 529 plans because I knew the markets were dropping, and then when I s- super funded it, then it grew a lot.
[00:08:30] And this is really interesting because you front load all the giving ’cause y- y- th- th- you, there’s a lot of time for that money to grow for your children and grandchildren. And I think here’s where people think too small. They say giving is just handing someone a check and hoping they do, uh, do something dumb with it.
[00:08:41] I don’t wanna do that. I tell all my family and friends, et cetera, “They’re giving money to my children. I’m just gonna just give it all to their 529 plans,” because you teach the spending very differently. It’s not about the spending, it’s about the ownership, and that’s why I love, you know, the story with my kids.
[00:08:54] I’ll give you an example. My son, Neil, uh, who’s 14, he got paid to do real work, to read books, and invest. So, like, if he read a book, I gave him $50, and he took the $50, went on, uh, Robinhood, and he actually, like, invested in companies. Now, I super-funded that with $1,000 to actually see it work for him. But that $1,000 turned into $7,000, like 7X plus his $50 of all the books that he read over the last three years.
[00:09:15] Like, you may think that’s small, but it’s not because he’s continuously like, you know, in, in a growing environment contributing, right? My daughter, Laura, became a CEO of a real business called 100unicorns.com at, uh, at seven years old. And she’s 10 now, and she has less interest in the business, but she learned a lot because she now has ownership of something.
[00:09:32] This is about teaching this ownership early. So if you don’t teach your kids to manage money you give them, uh, but instead you teach them the systems and to make money while they sleep, they’ll learn to manage it automatically, and that’s the cool part here. So in the whole giving thing, I would ask your advisor, I would learn these, I would learn the rules.
[00:09:49] Say, “What can I give?” You can’t just give money because it’s considered a gift. It’s income, right? What can I use during my lifetime? Can I give my house during my lifetime? Can my parents give me their house over their lifetime? Can somebody else gift me the house and then I, can, can I, you know, then give it to a trust and charity?
[00:10:01] Should we super fund our 529 plans? Should any tuition and medical expenses be made directly to, for tuition and medical expenses directly so there’s no gift issues? For example, if you, instead of gifting somebody money and having them pay for medical expenses, if you just paid the, the hospital directly, it’s, you know, there’s no gift tax to them, and it’s a deduct- deductible expenses for you.
[00:10:18] Like, that makes sense. So what should I give during my lifetime, and what should I stay in my estate that’s really important? Again, everything varies. You should talk to your advisor about this stuff. You should ask the questions. A lot of times advisors are really good. They don’t think about… They answer the questions really well that you ask.
[00:10:31] We just don’t ask them the right questions. All right, cool. Third part of this, skipping. Skipping passes wealth beyond generations, meaning the plan can be built for children, grandchildren, future family members. If you wanna keep a house in your family, if you have a big farm, if you wanna keep, uh, stock in your business and you want a family business, how do you keep that going?
[00:10:47] Well, the reason is, if you don’t set it up right, it’ll get taxed in every generation. That’s why you have things like generation skipping trusts or dynasty trusts or, you know, the generation skipping trust exac- exemption or life insurance in a, in a irrevocable life insurance trust called an ILIT, or you build a family bank.
[00:11:01] Uh, let’s talk about family bank. A family bank is a system to manage the capital of a family. The Rockefellers actually did this. Life the, they buy a life insurance policy on every single person in the family, and the, as you can pay the premiums on the policy, it has cash value of the policy. The family, as the family members grow, they borrow from the cash value of their life insurance, and they do investments in education and deals and whatever, and then if someone dies in the family, all the life insurance comes right back into the fa- into the family bank.
[00:11:27] And, and, and in the first generation, it means nothing, but in the third generation, the, the bank is worth insane amount of money, and that’s what the Rockefellers did. So if you, if you want to do anything, like if you just did that and built a family bank structure, you would crush it, because in generations to come, the third generation would be like, “Where did all this money come from?”
[00:11:42] And it all came from life insurance that was used to borrow and build a family bank against all of it And so the, the, the, the reason I’m sharing all this with you is the family bank idea is super simple. The, the family capital, you, you have set some rules. You say, “Hey, every time a new child is born, a new policy’s gonna be added,” and then you…
[00:11:57] If someone passes away, all the death benefit is just added to the entire bank, and it crushes because you need the liquidity from time to time. I’ll, I’ll give you a crazy story. You have to- you cannot pay the IRS- you need liquidity because y- you cannot pay the IRS or you cannot pay debtors, creditors with assets.
[00:12:12] There’s this guy, his name is Joe Robbie. He, he owned, he was the single owner of the Miami Dolphins. There was not a lot of estate planning done. When he died, this, the estate tech, esta- s- the estate tax was not set up right, so the problem was so huge. The team was the main asset, so the family was actually forced to selling the Miami Dolphins.
[00:12:27] That sucks, right? And if you do the skipping correctly, you don’t have to, you won’t get stuck doing any of that. So again, I would ask your attorney, “Hey, do we need some generation skipping? Do, should we set up a family bank? Uh, should we, sh-” You know, “Is, is the cash value life insurance, should that be held in an irrevocable life insurance trust?”
[00:12:45] You know, how do you build a bank for future generations? I- if you’re like, “Man, Sharan, I’m only thinking about my life today,” that’s fine, but maybe there’s a s- simple way to think about life for the future without a lot of money and without a lot of thinking. You can just make it a goal for the year. You don’t have to make it a goal for today.
[00:12:57] So this is like, I’m bringing together part three of all of this. So this is the tax advantage matrix. The third part here is the transferring of wealth, freezing, giving, and skipping. Freezing locks today’s value, giving moves assets during your life, and skipping passes wealth beyond generations. And all I’m suggesting is that you should talk to a well-educated asset protection and estate planning attorney to, like, just think through what the next 10 years look like so that you have this stuff in place.
[00:13:20] And the cost of setting all this up is so small compared to the benefit that you can get from all of it. If this is the only episode that you’re listening to, just listen to this ’cause I’ll summarize all of these for you. Number one, the tax advantage matrix is exactly what I built myself. Nine kinda levers that I can pull to have the best tax advantages for myself and my family.
[00:13:35] There are three levels. Level number one is to lower the bill today. Level number two is to design a structure for however all the money flows. Desi- Level number three is to transfer the wealth. When you lower the bill, you have deduction, you have incentives, and you have timing. When you design a structure, you think about entities and classification and location.
[00:13:50] And you think about, uh, transferring wealth, you think about freezing, skipping, and giving, which is what we talked about today. By the way, the entire … You can take, um, you can go to the show notes on this episode. You can take the entire full transcript, you can put it into AI, and you can have it draw yourself a map, and then tell it to ask you the question that you’d a- you should ask your CPA or attorney or whatever.
[00:14:07] Copy, paste, and send it to them. Like, you, you, you spent the time listening to this, you might as well do something with it, right? Hey, if all of this was helpful, can you do me a favor? This is a little technical. I broke it down into three episodes for you. I really hope that you listen to all three. I know I talk fast ’cause I love this stuff.
[00:14:18] If you like this, can you do me a favor? Can you screenshot this and tag me? That way, I can make more like this for you. Please screenshot this and tag me, and I can make more like this for you.
[00:14:34] Hey, this is Sharran. I have an awesome free gift for you just for listening to the podcast. As you may know, I’ve got a chance to build two billion-dollar companies the hard way. So if you like this episode, you will love getting the exact playbooks from those wins. It’s on my Substack, called My Next Billion. It has the exact frameworks I wish someone had given me when I was figuring it all out. Now you get the real lessons from the trenches as I go for a three-peat and build the next billion. So everything’s free at mynextbillion.com. Please check it out at mynextbillion.com.