The IC-DISC Show

Ep054: Wealth Preservation Masterclass with Jonathon Morrison

May 7th, 2024

In today's episode of the IC-DISC show, I sit down with estate planning expert Jonathon Morrison. Listen in as he shares strategic guidance for business owners worth $10+ million on safeguarding wealth in the changing tax landscape.

With the looming December 2025 deadline, Jonathon explains trust structures and exemptions that can freeze business value to minimize estate taxes. From revenue crunching to complex legislation, his expertise cuts through financial jargon.

For those growing rapidly or concerned about legacy, this conversation provides nuanced counsel on leveraging sophisticated legal mechanisms.



  • Jonathon Morrison, an estate planning expert, discusses strategies for business owners to preserve their wealth and protect it from potential estate tax changes expected by December 31st, 2025.
  • We examine the importance of proactive estate planning for business owners, especially those with assets ranging from $10 to $100 million, to minimize estate tax implications.
  • Jonathon emphasizes the benefits of sophisticated trust structures that can 'freeze' a business's value for tax purposes while providing robust defense against unforeseen events.
  • The conversation covers the urgency for business owners to engage in estate planning before the anticipated decrease in estate tax exemptions in 2026.
  • We explore how transferring business ownership into special trusts can help business owners maintain control of their assets while reducing their taxable estate.
  • A case study is presented, demonstrating how strategic valuation discounts and transferring minority interest to a gift trust can result in significant estate tax savings.
  • Jonathon outlines his unique business model, which includes direct engagement with clients, flat fee structures, and comprehensive annual reviews, to provide personalized estate planning services.
  • The episode touches on the financial benefits of estate planning, such as savings on estate taxes and protection of inheritances from creditors, lawsuits, and divorce.
  • During the podcast, Jonathon shares his personal background, including his passion for car collecting and his roots in Arizona.
  • We delve into the complexities of funding designs for gift trusts, stressing the importance of optimizing both the trust structure and the funding strategy for maximum effectiveness.

Contact Jonathon


Show Notes

Be a Guest

About IC-DISC Alliance

About Frazer Ryan Goldberg and Arnold LLP


Jonathon Morrison


(AI transcript provided as supporting material and may contain errors)

Dave: Hello, my name is David Spray and welcome to another episode of the IC Disc Show. My guest today is Jonathon Morrison, a senior partner at the law firm of Frazer Ryan Goldberg in Arnold. Jonathon is a highly specialized estate planning attorney for people with large estates, Jonathon has a unique approach and covers a variety of different strategies. I think the biggest takeaway is that if you believe in hyper-focused specialists and you own a privately held business, then Jonathon is probably the guy for you. We covered again a number of different strategies and the urgency of December 31, 2025, why that's so significant for estate tax planning and he also encouraged everybody to address it this year rather than waiting until next year. I hope you enjoyed this episode as much as I did. Jonathon, welcome to the podcast.

Jonathon: Thank you, David. Thanks for having me.

Dave: Where are you connecting from today.

Jonathon: I'm down here in Scottsdale, Arizona. I'm a senior partner with Frazier, Ryan, Goldberg and Arnold. We're the largest trust and estate firm in Arizona. I'm a senior partner focusing on advanced estate planning for large, complex estates.

Dave: Awesome. So I know you went to Arizona undergrad. Are you from Arizona?

Jonathon: Yeah, I grew up here, all 18 years of my life in the same house. I've got a nice-.

Dave: You're like the only one. You're the only that's right, a lot of yeah.

Jonathon: Yeah, so I went to U of A studied finance Accounting, and then I went up to law school in San Francisco. I lived in the heart of the city for about 11 years and met my wife, and then we came back to raise kids here in 2015. So I've got a six-year-old Jack and a three-year-old Rose.

Dave: That's awesome, and I love Scottsdale. I go there every January for the Barrett-Jackson auctions. I always enjoy being there.

Jonathon: Well, you probably saw my bio I am a car enthusiast, collector, track driver.

Dave: Oh, I didn't realize. I didn't realize that. I know cars are like kids, you can't really have a favorite. But if you did have a favorite, what's your favorite?

Jonathon: Over the years I've had a lot of cars, but I primarily drive and collect Bmws, Porsches and,

Dave: Okay, yeah do you have a 2002?

Jonathon: I don't have a classic 2002, mostly modern stuff. Okay, all the modern sort of m2s, m3s. I usually I only have about three or four cars at a time, unlike a lot of guys, but I swap them every six, twelve months I'm changing them in and out understood,

Dave: So I drove a Tesla model s plaid three years ago and my enthusiasm for gasoline engine just kind of went away.

I always said I was brand agnostic and powertrain agnostic. So at one point I had the Tesla Model S Plaid, I had a Camaro ZL1 convertible six speed and I had a Jeep diesel Grand Cherokee which I had a special order to get the three liter diesel. So I'm like three brands, three propulsion types, but I'm down to actually one vehicle for the first time in a long time, a Rivian R1S, which is by far the best vehicle I've ever owned.
My biggest concern with them is just whether they're going to be in business in another year or not.

Jonathon: Right, right. It's like Fisker they keep coming in and out and I just saw news today they're not doing well. Yeah, I've never driven the Plaid, although my one of my Ferraris is faster than that Plaid, believe it or not?

Dave: Oh wow.That's great. Well, we'll have to talk about it more and I'll be sure to look you up next January on Scottsdale, please do so. We're going to talk about estate planning and I know enough to be dangerous. My listeners and clients are privately held business owners with enterprise values between probably $10 and $100 million. The business represents the majority of their net worth and I understand there's some things going on that have some deadlines that create some urgency, so why don't we get into it? So just start wherever you want to.

Jonathon: Sure, yeah. So those clients are really my clients, mid-market business owners for the most part. My practice, again, we call it advanced estate planning. What that means is the net worth, including business real estate, is high enough to warrant planning beyond just the will and living trust, powers of attorney, the core estate documents that everybody needs. Once you get to a certain wealth level or income level, then you need to start focusing on advanced planning, which encompasses, we joke all the acronym planning, all of those acronyms you hear about in the estate and gift world. So for mid-market business owners, right now generally you're looking at $10 million minimum enterprise value. That warrants a good look at estate planning.

We have the urgency at this point it's not as urgent quite yet which is the time to catch us because there's a limited number of Jonathon Morrisons in any state other than, you know, California I practiced up in Silicon Valley for about a decade or Manhattan you know there's about 50 of us, but in most of the smaller, any other state, there's maybe five, maybe that really you know, do this day in and day out.

It's like a heart surgery. I've done this over 500 times transactions, design, implementation, and you've got to have at least 200, 250 reps before you really know what you're doing, mastering the vehicles themselves and then being able to distill it and communicate it to clients and be able to then get it done very quickly without you know. Business owners they hate this stuff. This is complex, it's annoying. They don't want to talk about death and taxes. They want us to operate their business. So I've done a very unique model that we can get into a little bit. I wanted to focus on the urgency, but a very unique model that's really custom tailored for busy business owners that need to get this done quickly, with high quality and low stress. But the urgency back to the urgency. So I think most of your listeners probably know that the 2017 Tax Cuts and Jobs Act, the Trump tax reform, is going to expire or sunset as of January 1st 2026.

Dave: Okay, Less than two years.

Jonathon: Yeah, yeah. So you know a year and nine months and as part of that, in the estate planning world, really the biggest change, perhaps the only significant change, is the reduction in the federal gift and estate tax exemptions. Okay, what are those? Well, right now there are all-time highs, okay. Right now you can gift during life or at death up to $13.5 million if you're single, without any gift or estate tax. Or if you're married, you can give to about $27.2 during life or at death, and above that, if you go over that, there's a 40% gift tax. If you gift during life or at death, a 40% inheritance tax paid by your children, and so that exemption amount is scheduled to be cut in half on January 1st 2026. We don't know quite yet the number. It's probably going to be somewhere around $7 million for a single and $14 million for a married couple. So significant amount less that you can gift to individuals, children, grandchildren, anybody else in 2026, unless you lock-in that exemption before then.

Dave: Let me just interject one second.So just understanding numbers that I do. If you consider a population one, everybody within a state over 27 million is group one and group two is everybody between 13 and 27 million of a state size. I'm guessing that group two is probably way larger than group one, even though on absolute dollars there's folks from 26 million all the way to billions. But I'm guessing is that assumption correct that a multiple of people who needed to worry about exceeding the exemption, those number of people, are now being multiplied. Is that right?

Jonathon: Yeah, once exemptions go down. You've got a lot of people now that have to worry about estate taxes. So in 2026, there's going to be a lot more people that need my services. But between now and 26, it's really. You know, if I had to pick a number, it's somebody that either already has about $10, $15 million or more, because you're doubling every 10 years, assuming the rule of 72.
Yep, those people need to look at this planning. But, more importantly perhaps, are a lot of your listeners. These are business owners and their businesses are on fire. They're just going out there. EBITA is jumping every year.

Multiples might be getting higher and so between now and their death they might be in their 40s, 50s, 60s. They got a long life expectancy. They're likely going to have a lot of them over $100 million net worth at death. That's when you have to measure this tax. You file a federal estate tax return within nine months after death and the government wants valuations and they want to see what you're worth and there's a 40% tax imposed at that time and that's due within nine months. There's a huge check that gets written.

The good news is, a Harvard professor famously said, the federal estate tax is optional as long as you plan for it. I don't care what you're worth If you've got 20, maybe 30 years to live, unless you're like over a half billion dollars of net worth. I can usually wipe out the federal estate tax through proactive planning and I've got, like I said, a finance and accounting background. I've got financial models that I run free of charge all up front to show you, Like I just did one for a $100 million business owner, and it showed that he had about 20 million of other assets. But it showed and he was 55, it showed that if he was willing to transfer 60% of his business into the special kind of trust that we were going to wipe out his $200 million projected estate tax in 30 years, it was going to go to zero and he had totally stabilized cash flow and liquidity between now and year 30.

So the name of the game is to figure out how much do we need to transfer, and you got to run financial models. Most attorneys don't do that, but for a business owner there's so much that we can do because we can value the business at less attractive values at the time of gift, number one. So valuations in the tax code say the valuation firm has to look at it from a discounted cashflow perspective, not a strategic buyer perspective. I just had a $600 million company that just sold a year ago. We got a value to $80 million because it wasn't valued from a strategic buyer standpoint.

So if you come to me and you're 80 and you've got $100 million of cash, it's a lot harder to wipe out the estate tax versus a business owner that's got a EBITA of $5, $10 million, but they're in their 50s. We can transfer some of that business out and rely on a number of other mechanisms to wipe out that estate tax and get asset protection while they're living, very easily. They keep total control over their estate if you do it right and the business.

Dave: so I'm intrigued. Tell me more.

Jonathon: Yeah, I'll tell you the exemptions going away when you run the financial models out 30 or 40 years for a lot of your business owner clients. Okay, there's, the exemption is prompting a lot of this planning and I'll explain one of the reason. But the exemptions are going down. It's use it or lose it. Okay. So let's say you've got a nice boring balance sheet $50 million stocks and bonds. Okay, single guy, you guys should definitely gift his $13.6 million exemption before 2026. We'll talk about you know, just gift it to kids. I've got a special vehicle that's done over 200 of these without an audit, making the cover of the state national state planning journal in May. So you've got a trust receptacle. If you do it right, that client could gift $13 million and keep total control and access while they're living. Again, if you know what you're doing and that irrevocable trust is designed from the outset correctly, which a lot of them aren't, I call that the optimized gift trust. So, again, that's a boring $50 million cash, stocks, bonds. So, business owners, we got the exemptions going away. That's prompting some of this.

Here's the more important impetuses for reasons to act. Number one, the business keeps going up in value. We want to freeze that appreciation on that business, gift it out of the estate. So all that post-gift appreciation on the business when they sell, all of that is soaked up off balance sheet. You don't your clients, my clients are too wealthy and we don't want them getting any wealthier because there was creditor and lawsuit exposure while they're living and then at death the government takes the estate tax. So the sooner we can get a client before the business takes off, transfer some or all of that business to that special type of optimized gift trust. Get them all the control, but start building wealth off balance sheet.

Rockefeller famously said you want to own nothing but control everything. If you do it right, they won't own that business anymore but they can control and access that gift trust in so many different ways. The IRS has lost so many cases in the last several decades. That allows us to pack those optimized gift trusts with so many controls. So again, number one urgency is really the fact that a lot of business owners are going to continue to grow their business and we want to shelter it. The second major reason is we have a lot of legislative risk right now.

I mentioned how over the last 40, 50 years, the IRS has pretty much been on the losing end of all the cases in estate and gift. In the old days you couldn't pack that much control in these gift trusts. The IRS has lost cases or given up or acquiesced in rulings that now, if you do it right, these gift trusts that you put in your business or other assets into, there's pretty much nothing we can't. It's technically irrevocable if you don't own it anymore. But if you do it right, like you'll see in my paper, my materials for the gift trust, they have so much control. In 2021, they almost patched it. Remember that Building Back Better bill yeah.

A lot of its owners were worried about. While there was a little piece nobody was paying attention to except for us in the state and gift tax eight pages it would have killed all of these flexible trusts that we use. Any quote, grant or trust would have been abolished unless you got it funded before Biden signed it into law. So I did 160 deals, $3 billion of gifts, that 18 month period. It didn't pass because remember there were two senators, Manchin and Sinema, that didn't vote for it but with and this is covered in my paper in the journal, they could, there's always rumors they could take another stab at trying to kill off Grantor Trusts. We also have interest rates that could keep going up. A lot of what we do leverages those interest rates. So there's a lot of headwinds in the near future, next few years perhaps. And the lowered exemptions this is sort of the “golden age of estate planning.” That's kind of fleeting because they're trying to kill off the trust. Exemptions are going down, interest rates are going up. If you're a business owner, this is the time to act. If you haven't already, okay.

Dave: Yeah, because I'm assuming, since you're talking about valuations being discounted cashflow, that these higher interest rates are creating bigger discounts.

Jonathon: That's part of it, I mean the major reason for interest rates being relevant is you can gift assets to these types of trusts.
But you're limited by that exemption, $13 million. There's another way you can actually get up to 10 times that amount in these trusts and that's the so-called sale to a defective grantor trust. What does that mean? It means I put $13 million of cash in this trust. I can then actually transfer another $130 million, 10 times in exchange for a note back to me.

That note, the IRS requires a minimum interest rate pretty much tracks the 10-year treasury. So the higher the interest rate, the more this trust is feeding back into your name, your taxable estate. So we want low interest rates, we want to be able to-. I see, a couple of years ago we were lending so much money at the 1% interest only 30 year fixed, Gift trust is arbitraging and we froze that client's estate at that note value with 1%. So there's other strategies like GRATS and CLATS that are interest rate dependent. But bottom line it's one headwind is the interest rate going on? So we talked about sort of the urgencies, business value going up. These cool trusts that we've been using for decades might be gone soon. If you don't get it done, you'd be grandfathered in under everything we've ever seen.

So this is the time to act. Now let's talk about the importance of that gift trust being flexible. Okay, I developed this thing in 2020. I call it, I just I call it an optimized gift trust. Okay, it's. If you know any of my gift trusts and many of your podcast listeners, I've probably heard of Idgits or Generation Skipping Trusts or Dynasty trusts or Slats, all these things. All those things basically mean is, hey, they're features of a gift trust that give you either tax benefits or retained control. So what if you create a gift trust and you just put all those things into one? I call it a hybrid. It's nothing new. If you go to Manhattan or Silicon Valley, they're not going to call an optimized gift trust. It's just how we do it there. But you go to smaller markets like where I live, Phoenix or it isn't even a small market but there's attorneys that aren't just getting, they're just not getting enough repetitions over the years. So these gift trusts a lot of the ones I review locally, for example just don't have the maximum strengths and controls that your business owner client can have if they're gifting.

And it's a big deal because if you run the financial model, the majority of wealth is going to be in these gift trusts. If they're not done from the outset, you might never be able to get that money back or change the beneficiaries or access it or do many, lots of different things. And I clean up bad, irrevocable gift trusts all the time. So in 2020, I developed this thing called the Optimized Gift Trust. Three page in out overview. I’ve got a seven page frequently asked questions. I try to productize things. I've done this 500 times. I try to take all this complexity and put it into a nice, easy to go package for business owners that are way too busy, and so this gift trust has all the bells and whistles and I mentioned.

I was just asked by the National Estate Planning Journal, the top journal in my field. I made the cover back in 2020 with a different product. This one, in May 2024, in a couple of months will be on the cover, the full legal citations. It was peer reviewed, everything. There wasn't a single change. So it all checks out, never been audited. It's audit-defensible as well. We've got an army of lawyers here at this firm, about three or four of them that are former IRS trial attorneys that can defend it.

But my point is, is these business owners need to make transfers here soon and you better darn have your gift trust within that 60 page document. It's irrevocable, meaning you can't change it, the terms of that trust, once it's done, and so if it's not optimized from the outset, that can be a big problem. So, yeah, you really want a flexible, accessible trust. If you do it right, the business owner, literally there's no downside. We can get it back in four or five different access points, make changes, especially if they're married. You can include slot powers, spousal life access, trust powers which give the marital unit even more control. So that's the again number one, the urgency to act, and the number two, making sure you've got a strong gift trust to receive that gift and make changes down the road.

Dave: Okay, yeah, that sounds that makes a lot of sense. So could you give us maybe a case study example, like anonymously. You know just to kind of give some color to some of this.

Jonathon: Yeah, sure. So I mentioned I have a unique process and as part of that, what I do is I prepare. I built out this financial model. Okay, if you go to any of the top I mean, I haven't found a bank yet that I really like their financial model. Even the top banks in the world. They've got these financial models that will illustrate what it looks like to gift into these gift trusts and they'll run it out 30 years and it'll show you cash flows and tax savings. But all the models I've reviewed are really developed by financial people, not estate and gift attorneys like me. So about 10 years ago I developed this bespoke model. It's Excel-based and we can input all you know. I basically have it custom tailored to what I like to do. So I put in spending, you know assets, asset performance, business assumptions, how long you're going to live all of these things and you put in. Really, it's determined, the goal of this is to output for me: How much does my client need to gift into this gift trust to cause it so that they, I joke die poor, if you get sued, you don't own it anymore. That objective, the competing objective, is we don't want them to put too much in the gift trust, because the IRS doesn't like if you're poking and prodding and grabbing the assets out of there. Ideally they'll never need to touch it. Okay, we've got all these access points that they need to get back in emergency, Great, but I want to make sure that they haven't given it away too much. They've still got plenty of liquidity, stabilized cash net of expenses, net of taxes, net of spending over here. So that's the output.

So you wanted a case study. You wanted a case study so I just did one of the sample model, that's client business owner. He's got about $5 million of liquid assets, cash stocks, bonds. He's got $10 million of investment, real estate. He's got a $5 million home. So you know $20, $25 million, but the bulk of his net worth is in the business. It doesn't have to be that way. A lot of business owners have a lot less. But the assumption was it was you could sell the business to a strategic for $100 million in two years. We went and got a valuation, looked at the company from the worst possible lens defensively low, top valuation firm, looked at EBITDA, looked at the markets and also applied minority interest valuation discounts. So a lot of times we're gifting minority interest in the company to the gift trust. You get further discounts. Bottom line, It's not atypical for a $100 million company to be valued at maybe $20 million when all the discounts are applied.

Okay enterprise discount, maybe down to 40, and then maybe another 40, 50% discount on that for minority interest. So we put all this in the model. He's spending $750 grand a year and then you've got inflation adjustments and everything. But the model showed that if he gifted 60% of the shares in his company to this special gift trust, that over the next 30 years, rather than his estate just growing, I think he has about $500 million in 30 years on these assumptions, causing a $200 million inheritance tax at death, 40% of 500. By gifting that 60% interest we froze his estate tax, I think about $15 million. So he always had about $50 million in his hands. But all but because he had that sweet spot, all of that future value, even when the business is sold and reinvested, we froze his net worth at about $50 over here and effectively, because of all the thing that's going on, the gift trust was worth $450 million at death.

That gift trust is not only exempt from 40% of estate tax at his death but it's generation skipping, meaning it's totally out of, permanently out of the federal 40% gift inheritance tax for generations. In Arizona, we got 500 years. Depends on which state you live in or you set it up but we wiped out $200 million estate tax and it made sure he had plenty of money to spend. Totally accessible gift trust if he ever needed to access it. Controlled the business units that he gifted away. We can still make changes to beneficiaries or give it all to charity or some of the charity down the road he could borrow from the gift trust all sorts of stuff. His wife could take distributions out, so that's a great, I mean this is a very common example of the power that estate attorneys that know what they're doing can do for a business owner for relatively small fees, very small fees compared to that type of savings.

Dave: Sure, and I presume that's where the word optimized comes in, because you're talking about that modeling and you're kind of trying to find that sweet spot of him having enough cash flow, enough control, right? Is that kind of what the optimization means?

Jonathon: You hit it on the head. There's two optimizations okay. The first is making sure that gift trust has optimized his retain and control right. We've given as much as the IRS case law allows with minimal risk. We're not going over the edge and there's a ton of stuff we can pack in there. So if he needs to do anything with the gift trust, we've got that optimized. And then the second thing is making sure exactly that the transfer into trust I call it the funding design, how it's transferred. Is it a gift? Is it a sale? For a note back, are we loaning additional assets? Modeling that out so that the funding design is optimized.

I have to put a disclaimer in here. I'd say 95% of trusts and designs that I review probably less than that are totally optimized. There's a lot of attorneys out there that are going to seminars. They're reading about certain gift trusts, especially SLATs, spousal Life Access Trusts and they think they can get on their computer and go on some document program and start pushing buttons and making it work. This is dangerous.
I didn't know what I was doing until probably about 200 transactions. I was at the top firm in Silicon Valley, took public Apple, Google, Facebook, Amazon, Tesla and I was training for 10 hard years before I knew what I was doing. So making sure that your gift trust is prepared by somebody that specializes in the field has done it many times, and not just the trust being done right. Maybe you can get those buttons right if you're pushing them. The funding design is much more complex and I don't know many attorneys that can the no numbers backwards and forwards. They usually rely on the financial advisor usually doesn't really know how to apply their financial modeling to estate planning. It's just, it's a concern. So, anyways, that's enough of that disclaimer. But yeah, you got to optimize the trust and the funding design, which is my journal article 15 pages, goes into everything I'm talking about in detail.

Dave: No, thank you very much. That is very helpful and we'll want to link some of that information that I'll get from you after we finish recording.

Jonathon: Excellent, yeah, happy to. I'll share the overview. Frequently asked questions and I'm not sure if I can share that journal article. It's in the final peer reviewed draft but once that comes out, happy to share that over.

Dave: That sounds great. Now what else do we need to talk about? Focusing on a business owner. So is it safe to assume that, say, somebody has a, They have a business that's worth $5 million. They have another $3 or $4 million outside the business. They don't anticipate huge growth in the business. Do they have a need for this planning?

Jonathon: Yeah, I think I mean. Again, it depends on what the value of the business you know. If you pass away, the IRS is going to require a valuation of that company within nine months. If you're over the exemption amount again in a couple of years. Here you know, exemption is $7 million for single, $14 for married. So yeah, I think if the value of the company and all the assets are $10 million or above, I think it's at least worth a conversation. There's a different design for a $15 million individual or couple than $100 million dollar. You might, for example, you know a lot of 20 or 30 million dollar cases I come across, not all business owners.

But, like the design there is, you want to consume one spouse's exemption you don't need and then preserve the second spouse's exemption. So gift out of that spouse's exemption, lock that in at least before 26. Right, partial forfeiture of the other spouse there's lots of things you can do. But yeah, I think I'd say it's probably closer. You know, 15 million is kind of net worth level, all in real estate business. If you die tomorrow it's worth talking about and running it, you know, and see if it's worthwhile.

Dave: Yeah, and because, like you're saying, one of the biggest risks of that scenario is, let's say, this hypothetical person is married and you know, let's say the exemptions drop in 27 to what you're thinking they will be, yeah, but let's just say, though, that the year before. And then let's say he dies in 2029, but let's say the year before he dies he just has a huge year, a record year, yeah, and then the business gets valued within nine months of when he dies, he might have a surprise valuation, right? So so, like that's, another piece of it too is you're locking in this valuation at the most conservative value and it sounds like postmortem. Some of those tools may be limited.

Jonathon: They're gone. Yeah, once somebody passes away, we can't do any estate tax savings for them. Yeah, you're right, locking in low valuation. So, for example, I just I represented these famous restaurateurs and you know definitely a couple hundred million dollars of restaurants. 2020 happened and all the restaurants shut down and I remember I was just I tried so hard they ended up not pulling a trigger. I said look guys, I said your value of your restaurants because of the COVID pandemic is like probably 20% of what it used to be. Nobody knows how long this pandemic's going.
I said let's get these restaurants transferred out of your estate at a depressed gift value. By the way, we got a file the only filing for this is a one-time Federal gift tax return said hey, here's our valuation, IRS, here's what we transferred. There's only there's a less than 1% reported audit rate on those. Okay, IRS has three years to challenge the value. If they don't which they never do then you've cleansed that gift and that valuation.

At death, Right now, there's almost 100% chance that an estate tax auditor at least somebody's going to look at it from the IRS. They might not do a full audit, but somebody's going to look at it. So if you've got attractive valuations, especially if it's a depressed year on your EBITDA. For whatever reason, that's the year to get it in. It's like buying low, selling high. Similar you want to transfer that into the gift trust when it's low, use a minimal amount of your exemption and soak up all that post-gift appreciation out of the estate. Two more things. Life insurance is a big deal. It's not something I sell, but for business owners it's just good estate planning.

Dave: Yeah, just to have the liquidity to pay the estate tax.

Jonathon: Exactly yeah, because there's a section of tax code the good news that says if you pass away and more than 35% of your estate is trapped up in a business, or even if you're a real estate professional, real estate business can qualify, and you get to pay that estate tax actually over up to 15 years. Okay, section 61. Here's the problem. The IRS wants liens. You've got now IRS as your partner or you died and your partner's now the IRS liens and all the headache. So here's what I tell clients. I say look, I can, if you live long enough, I can almost certainly wipe out your estate tax without you ever having to, you know, lose control or give up a penny, essentially. But until, like, if you've already come to me, you've got a hundred million dollars, say well, or a business worth a hundred, say it's going to take some, there's some time component.

Can't immediately wipe out the death tax, but there's a time component, usually by like year 10, 20, we're getting close. So buy a big old policy of life insurance. We get it into the gift trust, irrevocable life insurance trust or ILIT, at least the death benefit isn't getting included in the estate. And then if you get a flexible life insurance policy, you can always scale down that death benefit as I'm doing my job over the years in the estate tax. You can reduce that death benefit, but if you have an unexpected death, at least we've got some liquidity to get the IRS out of the way and you don't have liens on the business for 15 years, right, yeah, so that's critical.

We've got a few more minutes, unless you have something else, I want to talk about my process, yeah, so again, this is very unique. Attorneys drive me as crazy as they drive most businesses. What's the complaints about? In fact, in 20 minutes I'm going to present to all my attorneys here at the firm on best practices, on efficiencies and productivity, because I've got all these systems down. But what are the knocks? Right, attorneys, they never get back to you.

They don't use email, hourly billing, some range, you know. I remember a famous quote. You know some attorney said oh, it's going to cost I don't know $5,000 to $10,000. And it was a construction, a builder, and I remember the builder said wait a second, I can quote a $20 million project down to the penny and you can't quote a darn estate plan to give me a $5,000 to $10,000 range. Anyways, hourly billings, all this, talking over their head. It takes five meetings to get anything done. It's complicated. So I solved all this. Five years ago. I went to just kind of revamp the whole model and I do a number of things. First, I don't have any junior lawyers. Okay, you think it's hard to hire in your industry for your business?

Try the neurosurgery of the law in a small market it's impossible even find senior lawyers that are really good at this at the advanced planning. So it's driving me crazy. You know quality control and delays, where who's on which client stuff comes back. It's a mess. I got a red line in it, lots of control lock with control, caseload control and quality control and delay. So I'd only use no junior lawyers. I take a limited number of cases.

I charge a premium fee but I joke that you buy my brain. You don't buy some 3rd year lawyers brain. Number two, it's a flat fee model. I've got a scheduled flat fee model, almost always tax deductible against the business income as a legal expense get. You get a 40, 50% discount right after that One-time fee. So we go through this process and we get it set up. Most people they need a will trust update. They need the optimized gift trust. Maybe they need this other charitable trust for income tax planning. But if you do it right, the structure is simple and it's easy to operate. At the very end of my process I've got an instruction manual. I call it. It says, hey, the lawyer set all this stuff up, but here's how you operate it.

Copy the CPA, copy the investment advisor. Here's six pages. Here's what you did. Here's how to operate it. Let's have annual reviews. I don't charge for annual reviews. I don't charge for phone calls. After they've done it, they want to add some minor assets in there. We don't charge for that. You get a one-time fee and you'll get all these hourly billings. And then the third thing that I do that's pretty unique, although probably in the next two years I'll be buried, so I don't know if I can do this part always, but right now, when it's slow years, we don't have a tax law change.

If I have a conversation with a new prospective client, 30, 45 minute call I then get all the information I need. I work for free initially, come back about four weeks later with a full roadmap recommendation memo about 10 pages. So here's your objectives, here's your background. Here's exactly what I would do if I were you. Include a diagram, include those financial projections.

I give it all away for free, takes me maybe eight, 10 hours, but because I've it all away for free, it takes me maybe eight, 10 hours, but because I've got all the processes, it usually takes other lawyers a lot longer than that. And then it has the fee, quote one-time fee. I'd say three out of four times people say maybe one of that. People say I like this lawyer. I see I've gotten to know him, I've gotten to see his work. I like the plan and here's what it costs one-time fee. He's not relying on junior lawyers. He's going to get this done in three phone calls, maybe two, and so they like to probably get to sample the process without having to pay 20 grand in hourly fees find out this lawyer isn't going to do it.

Dave: Yeah, lots of that is really. And the thing is, even if they took your roadmap to another attorney, unless they had your level of expertise, they really couldn't execute on that roadmap anyway, right?

Jonathon: Yeah, that's the thing I joke. Sometimes I say I can give you the key to my Ferrari, but I don't know. It doesn't mean you can drive it right, you could turn it on, but you're not going to know how to really use it. So that happens every now and then and I'm straight up, I say look, if you shop this around, you can probably get it for half a third of the cost.

Dave: But you're going to get a junior lawyer.

Jonathon: You're not going to get somebody that's done this 500 times, Top firm in Silicon Valley. You know you're not going to get it in two or three phone calls. I mean you just I'm doing all the drafting over time. I mean iron sharpens, iron, you get those reps. Senior lawyers are lazy, they're just sourcing business and sending it down the hall to a junior and they don't know what's going on in those documents.

And if it's not done right. You're building a house for all of your wealth $450 million my client projected. If that trust isn't done right, we have client, like a lot of our clients myself, we'll spend 20, 30 grand on a kitchen remodel. But I have clients that say wait a second, I don't want to spend $50, 100 grand on this, I can get it done for 15 or 25. And I'm like do you know how important this is? This is not the area to skimp. You want an experienced lawyer drafting because you can't change it later if it's not done right.

Dave: Yeah Well, and then the fact that it's a, fact that it's a, it's an upfront payment.

Jonathon: Like you know that they get the annual reviews for you know, right? No ongoing billings and you're working?

Dave: yeah, there's huge value. It's unique it shouldn't be unique.

Jonathon: In my industry it sounds like you know most industries they've come a long way. The law is still behind the times, at least in the state.

Dave: Yeah, the law and in the accounting profession too. Yeah, right, so the other thing that I think people don't realize is that folks really don't need a pure custom estate plan. My sense is they need a standardized plan, right? Because I'm guessing that all of those 500 estate plans you've done fall into a small number of categories, fact patterns, right?

Jonathon: I agree. There's probably about five fact patterns. You've done enough. You know this is this bucket, this is the design and then when you go through, there is customization, right, Once we go through I send out the draft gift trust. It goes out with an explanatory memo. There's 15, 20 custom decision points usually that we go through. So there's customization. But generally you're right, the design, the funding design, most of the time goes in four or five buckets.

Dave: Well, it's the same reason that you know, for better, for worse, a Toyota objectively has better big build quality than a hand-built exotic car because of the repetitions and the standardizations and the perfection, and you know six Sigma, you know defect measurement, and now so I can appreciate the value of starting with a framework that's proven. I mean even just something as simple as you know when you're, if you start with standardized documents that you can search and replace, you know stuff with you're far better off than just starting with a clean slate or something that's very different than what you're going to end up.

Jonathon: You're right. Yeah, I mean my process, my documents I put hundreds of hours into and I'm constantly. That's again, a benefit of doing it myself and not relying on junior lawyers is I'm constantly tweaking my forms. At least once a week there's something in a memo or something I'm going to add this or change this, and so you're constantly improving it. That happens at a lot of law firms, but again, it's usually junior lawyers that are updating, doing all that, and you don't have senior lawyers doing this over and over.

Dave: So yeah.

Jonathon: And again, the times suck for business owners. They, like you know, you know when I've done. Probably each of these cases takes me I don't know 10, 20 hours, all in right. If you multiply that by my billable rate, you know it's more expensive. You're buying the premium of making sure something that's been done. You know, optimized right and so yeah there's a premium.

I have a buddy that jokes, or he's always asking me well, I've got this document model, this software that I can just push the buttons, like you know. Why are you charging so much? Like I said, it's so much more than just even if you get a good document. It's the funding design, it's being able to immediately respond with answers, being able to simplify complex things like we've had during this call, and spit it out in a digestible, understandable format. It's the process. It's the backend instruction manual and the front understandable format. It's the process. It's the back-end instruction manual and the front-end memo. It's all of that. That's where the value is. And again, I'm going to tell my lawyers in about 10 minutes. I'm going to talk about all this with them, because lawyers don't do this right. They don't do it.

Dave: Yeah, they're really paying you not for your time, but for your expertise, knowledge, best practices, all of that. Well, hey, I know we're running up against our time limit. If somebody wants to reach out to you, what's the best way for them to reach out? Linkedin, email , phone?

Jonathon: Email's best. So Frazer Ryan, goldberg, arnold,, and again reach out say hey, here's my situation. Heard you on the podcast and I've got a forum process. I respond here's all the materials, here's where I think hop on a 45-minute Zoom. A paralegal usually gathers some 10 minutes of information before that.

We'll run the numbers on the fly. We'll look at the stuff on the fly and see if it makes sense and I tell clients look, I make a good living. I say if this doesn't work for you, I'm happy to talk myself out of a job and tell you doesn't. But if it does, you know let's get going. Because there's so much there's no other industry that you can get thousand to one return. I mean $200 million of estate taxes saved for less than a hundred grand. No other any good financial advisor knows to run to the estate attorney, cause that's where the that's a low hanging fruit, it's the best money you can spend. And then making sure we also make sure all your kids inheritance protected from creditors, lawsuits and divorce like that may be more important than the tax savings. Making sure that the kids inheritance is well-managed and protected, even if they have control over it. We can do it, so it's all protected so a lot of there's a lot of benefits to what I do.

I love what I do and it's easy to sell because it's something I believe in.

Dave: Yeah, there's a lot of. Well, Jonathan, I can't tell you how much I appreciate you taking time out of your day. I know you have a meeting to get to, so why don't we wrap it up and again, thank you so much for your time and have a great day.

Jonathon: Thank you, wonderful, appreciate it.