What Wealthy Families Do Differently to Protect Assets and Transfer Wealth

Steven Bowles, CLU (00:00)
I’m working with with families in ⁓ Utah and California right now. One in Georgia as well, and just all over the place. But really, it’s just around making sure I connect with families before they

before they have an estate tax issue or when they start to identify that they do. And then we have a historically high estate tax exemption right now. So there’s a lot of planning opportunities. So people that are heading in that direction or are over that threshold, the one thing that we know about permanent changes in tax code is that they’re written in pencil. So we have a historically high exemption now, but we need to be planning for when that changes because it will change at some point.

Dylan Silver (02:18)
Hey folks, welcome back to the show. Today we’re joined by Steven Bowles, founder of Catalyst Advisory, where he helps investors and high net worth families protect wealth, transfer assets efficiently, and reduce unnecessary tax exposure. Drawing from years of experience inside a family office environment, he specializes in advanced life insurance and wealth transfer strategies designed to preserve legacy and keep more wealth in the family. Steven, thanks for taking the time today.

Steven Bowles, CLU (02:47)
Thanks for having me on, Dylan. I appreciate it.

Dylan Silver (02:50)
Now, you spent years inside a family office, high net worth ⁓ families, right? What are wealthy families doing differently when it comes to protecting and transferring wealth?

Steven Bowles, CLU (02:56)
Mm-hmm.

Yeah, that’s a great question because they do think about things just they have a little bit different mindset when it comes to that protection and legacy of their wealth. But there’s lessons in there that we can apply to non-family office level estates, if you will. And so one of the first things when I first came into that business, ⁓ I was working specifically within an entity that advised other family offices.

excuse me, and high net worth families on well transfer planning, I really didn’t know anything about the space. I learned it from the ground up. And so what was interesting is I could see these trends and how the families thought,

And one thing I saw was, well, how do they think about wealth creation and then how do they transfer that into wealth preservation?

On the wealth creation side, I’m looking at these balance sheets and we’re not a traditional financial advisory firm. We don’t care about the equities and so on and so forth. We just care about what’s their asset mix. And what I saw was there’s heavily

operating businesses and real estate. This is the way that they’re creating their wealth. And then from there, those are two asset classes that are highly illiquid. They start to think about, how do we preserve that? How do we disinherit the IRS? ⁓ the first thing that we can apply to us is that they really think generationally about that wealth. So they’re no longer chasing alpha and looking at it that way. They’re thinking, how do we make sure that this is having the kind of

generational impact that it could have if we do this correctly. And that’s really the first lesson that I started to realize within there, aside from the fact of what’s our asset mix look like? How does that differ from what I’m doing today?

Dylan Silver (05:41)
Right, and so you see this different thought process on a granular level. If we wanted to apply that to someone without millions of dollars liquid, what would be some of the first things that people could do, maybe without giving away all of the gold, but just the nugget here for us?

Steven Bowles, CLU (05:58)
Sure.

there’s some great nuggets. The first thing is they do a really good job about putting structure in place. Structure is a really generic term. So what I mean by that is being intentional about how their assets are owned, ⁓ how in particular we were doing a lot of work around moving those assets out of their estate and transferring value, but still retaining control. But how are those assets owned? And then the other really big thing that I saw the most successful families in that space

We’re really good about educating the next generation and preparing them to be stewards of that wealth beyond their lifetime. And the ones that put intentional preparation into it along with the structure really position themselves to be able to have generational wealth. And you can do that without having a hundred million dollars.

Dylan Silver (06:50)
Now you mentioned structure. ⁓ Again, on a granular level, are we talking, you know, LLCs, S-Corp, trust, this type of thing?

Steven Bowles, CLU (07:01)
We are. Yes, absolutely. I LLCs, holding companies, ⁓ irrevocable trust structures, they all play into it. ⁓ But again, that needs to be very intentional around what’s the goal and how do we in the world of advanced planning of really moving assets out of the estate and keeping them out of the estate tax purview, there’s a point in time where you start to recognize I can transfer value and still retain some control.

And then in doing that, during that period of time where I’ve transferred the value and retained some control, I need to be preparing the next controllers of that value to make sure that they can perpetuate the goals well beyond my lifetime.

Dylan Silver (07:45)
pivoting here, Steven, for real estate investors, do they face any specific challenges as compared to maybe, you know, wealthy families who are not so real estate heavy? And also, you know, is there particular bottlenecks that real estate investors or hurdles that they have to look out for in their business when they’re structuring?

Steven Bowles, CLU (08:10)
Absolutely. First off, real estate is, I would say, I hate to use a definitive term, but I think every single balance sheet I looked at had a significant real estate portion. So period, like there is a lot of real estate that are on the balance sheets of the wealthiest families that I’ve worked with. ⁓ The challenges that it brings up is you have an asset that’s illiquid and you have an asset that benefits heavily from depreciation.

which gives us a low basis. So you want to see, it brings in this dynamic of you need to do planning around basis as well as estate taxes. Cause we want to see that step up in basis, right? If we buy, borrow and die, then the whole point of that is to get that step up in basis. And if we move things out of the estate, then we could forgo that. So it brings a challenge to the table, but it’s ⁓ a challenge that can be overcome if it’s done very intentionally.

It is part of why life insurance can play a role in that of trying to move assets that don’t benefit as much from the step-up and basis, retain assets that do have the step-up and basis, but create a liquidity pool so that we can swap those assets into a trust later and pay our estate taxes while still getting the benefit of a step-up and basis. So I give you a little bit of, that’s a little bit of an advanced planning 101 in about 30 seconds there, but that’s some of the.

that some of the ways that we try to target, how do we balance that step up and try to ⁓ plan for estate taxes as much as possible.

Dylan Silver (09:46)
Now when you mention life insurance, is this the ⁓ infinite banking concept or is this a different strategy?

Steven Bowles, CLU (10:26)
It’s similar. ⁓ So infinite banking is an overall concept. It does work best when you’re within your estate and you have full control. But the way that you design policies for infinite banking is very similar to how you may design some policies for wealth transfer planning, although there’s other options as well that work better. That could work better depending on

the other planning involved. So if we’re moving assets to a trust and those assets are kicking off income, well, we might fund the policy a little differently. We might use bank financing and leverage. There’s different ways there, but infinite banking is a fantastic tool still within the estate. It can work outside of the estate, but we have another layer of a trustee involved. So the answer is yes, kind of.

Dylan Silver (11:21)
It’s an interesting ⁓ way to finance real estate. I haven’t delved into this myself, but I’ve had so many ⁓ wealth managers and then people involved in the life insurance space on the show, talking about the infinite banking concept. I had one person here recently ⁓ in New Jersey, if I’m not mistaken, which is where I grew up, talking about how if it wasn’t life insurance, if it was some other financial product,

that he would be plugging that, but it’s the benefits that come from the infinite banking tied to life insurance that make it so powerful. So when I heard that, I said, you know, I think more real estate investors do have to look into this and not be so maybe thrown off by the concept of it being a life policy.

Steven Bowles, CLU (11:57)
⁓ huh.

Yeah, the life insurance is just the chassis. The mindset around infinite banking, there’s a lot of great education around it. There’s some good books that you can read to try to really understand it conceptually. And you can technically integrate infinite banking without life insurance by using other asset classes. But when you take a look at what’s the best asset class for being the core of your bank, ⁓

life insurance checks off more boxes. So that’s really where it is. It’s possible to have that mindset without the life insurance. There’s people that are uninsurable that still integrate these things into their life. ⁓ But ultimately, and that could probably be a half hour podcast itself, but ultimately that ends up being the best asset to be at the foundational asset for infinite banking.

Dylan Silver (13:04)
I’ve got a question here for you that I haven’t asked anybody else, but you’re the person to ask for this. There’s a lot of people right now who are looking to tap into the equity in their home through cash out refinance, through HELOC, and maybe some other strategies as well. I’m curious, do you have a preferred method to tap into equity in a home?

Steven Bowles, CLU (13:30)
⁓ so I prefer the HELOC method, but that’s not, that’s more of a personal preference. ⁓ I think with where, with where interest rates are right now doing the cash out, mean, ultimately you’re resetting your clock on, on the, ⁓ mortgage rate or the mortgage term. And you’re putting yourself kind of back into that, ⁓ that high interest part of the amortization schedule.

So I do prefer the flexibility of the HELOC. It does operate a lot more like how policy loans ⁓ on a whole life policy work. So there’s some familiarity there. And there’s also the ability with the HELOC, you can kind of scale it to exactly what you need. Whereas with the Cashout ReFi, you’ve made a decision, you’ve got the cash, you better execute with it and you gotta use all of it, right? To really.

to really make sense. So I think there’s some benefits to the flexibility of the HELOC.

Dylan Silver (14:28)
Now, I’ve also seen so many investors continually transfer the equity in their home to new properties. And then a different problem arises where you now have so many properties, but you may actually not have been focused on the structure. And there’s also, you know, tertiary issues that could arise like cash flow. You could have lots of assets, but limited liquidity.

For real estate investors who are scaling their business, do you see any common errors arise?

Steven Bowles, CLU (15:41)
The common errors would typically reside around getting into asset classes that they’re just not very familiar with. So seeing successes in a certain asset class and then saying, hey, I’m going to scale up to what I view as the next better asset class. And then getting into an area that they’re just not as familiar with. And now they’re playing with bigger numbers and more leverage and then start to see that they’re not really

they’re actually not benefiting any better and possibly worse than they were in the asset class that they really understood.

Dylan Silver (16:17)
Yeah, multifamily syndicators, for example. ⁓ I’ve had a lot of folks here who’ve talked about going from one asset class into multifamily and syndicating and how difficult that can be because if your timeline for construction is 18 months, two years, so much can change in that time. And then it’s not like you can just quickly go and sell the property. You typically are holding it for three to five years, sometimes longer, and so much changes.

Steven Bowles, CLU (16:21)
Sure, yep.

Mm-hmm.

Dylan Silver (16:45)
in that timeframe, right? If you were to be getting into real estate investing right now and you’re, you know, fresh off of ⁓ doing a dive into Google and podcasting and so much else, is there any one asset class in real estate that you’re particularly bullish on or that you find particularly interesting?

Steven Bowles, CLU (17:05)
⁓ so I, I’ve wrote a couple of cycles. did the, ⁓ I, I’ve got into short-term rentals at, at a good time and I got out at a good time. So like, that was great. What I, what I kind of learned from that whole cycle is I got in before everybody was talking about it and I got out when everybody was talking about it. ⁓ so sometimes when, when people are talking a lot about a certain asset class that has been around for a while.

that sometimes that’s an indicator that you might not want to go into that. And really you wanna have your network be really tight. So I think you have a mastermind group, mastermind groups are great for hearing what other people are learning about before everybody’s talking about it. So to answer your question, I don’t have a specific one, but that’s where I think about it is I wanna know what are my other peers and the people in my network.

into and talking about that not everybody’s talking about yet, because there might be some opportunity there. So, you know, for a little while, obviously, the last six years, we saw a lot of cycle changes in that area. It seemed like six years ago you couldn’t miss in multifamily. And then we found out you could, you know, self storage has been hot for a while and it’s still it’s there’s still probably some opportunity there. ⁓

Boutique hotels, that’s another area that I think there’s probably some opportunity there, especially as short-term rentals start to get clamped down. And then the next question is, okay, well, what else? What are other people figuring out and why are they figuring out that there’s opportunities there? And then, ⁓ and just really digging into that before it’s really saturated.

Dylan Silver (18:53)
We are coming up on time here, Steven, any new projects that you’re working on and then also anything you’d like to mention directly to our audience.

Steven Bowles, CLU (19:01)
New projects. ⁓ There’s nothing crazy new that I’m working on right now. I’m working on a lot of just large cases for some families across the country. ⁓ It sounds like I’m just across the river from you. I’m outside of Philadelphia on the Pennsylvania side.

Dylan Silver (19:18)
I’m actually in Texas these days, but I grew up in northern New Jersey, yeah.

Steven Bowles, CLU (19:20)
you’re in Texas.

In North Jersey. Okay, great. Yeah, I’m just over the river from from central Jersey.

But I’m working with with families in ⁓ Utah and California right now. One in Georgia as well, and just all over the place. But really, it’s just around making sure I connect with families before they

before they have an estate tax issue or when they start to identify that they do. And then we have a historically high estate tax exemption right now. So there’s a lot of planning opportunities. So people that are heading in that direction or are over that threshold, the one thing that we know about permanent changes in tax code is that they’re written in pencil. So we have a historically high exemption now, but we need to be planning for when that changes because it will change at some point.

And that’s a lot of the work that I’m doing right now is just helping people be structured so that they can make decisions when that does inevitably change at some point.

Dylan Silver (20:23)
Steven, thank you so much for joining us today. Thanks for your time.