This Issue: Wealth-Protecting Tactics of the Ultra-Rich

Don't dwell so much on a problem that you've exhausted yourself before you can even entertain a solution. It just doesn't make sense. It takes brainpower and energy to think positively and creatively -- and to see creatively and positively. Going negative is the easy way, the lazy way. Use your brainpower to focus on positives and solutions and your own mindset will create your own luck.

Shakespeare put it this way, in a famous quote from Julius Caesar:

"The fault is not in our stars, dear Brutus, but in ourselves."

That's a clear message. We are responsible for ourselves. We are responsible for our own luck. What an empowering thought! If you see responsibility as a bum deal, then you are not seeing it for what it really is -- a great opportunity.

Let's say you're facing some big challenge today. I can tell you right now you've got a lot of company. What will separate you from the complaining crowd will be how you choose to look at your situation. If you believe you are in control of it -- and you are -- you will know exactly who to look for when you need help: yourself. You could be your greatest discovery yet for success, luck, power, and happiness.

When I encountered enormous financial challenges back in the 1990s, I was mature enough to assume responsibility and know that the problem was mine. I knew it wouldn't do any good to blame other people. That would be a waste of time, and that's one kind of loss I don't like. Time is something that cannot be replaced. If you find yourself slipping into the blaming others mode, get out of it quickly.

Give luck the chance it needs to play itself out in your life. No one can do it for you. As soon as you discover that luck is yours to create, you'll be thinking and seeing things in a whole new way. So work hard, have fun - and good luck!

Today’s article is adapted from Donald J. Trump’s newest book, Trump: Never Give Up: How I Turned My Challenges into Success, published by John Wiley & Sons.  

“Building wealth is useless if you can't protect it from the government and other people who want to take it away from you,” says attorney J. J. Childers, one of the newest additions to Trump University’s distinguished faculty.

J.J., a native of Little Rock, Arkansas, is a licensed attorney who specializes in wealth structures that reduce taxes and shield assets. His unique ability to explain complicated strategies in simple terms has made him one of the most sought-after experts on asset-protection anywhere. Every year, he helps thousands of wealthy individuals safeguard their assets from what he defines as the three biggest threats to personal wealth: lawsuits, income taxes, and estate taxes.

And now, J.J. can help you protect your assets too. Because shortly after joining The Trump University faculty, he wrote the new book Trump University Asset Protection 101: Tax and Legal Strategies of the Rich. It’s a tax-smart guide to help you keep more of the wealth you have worked so hard to amass.

This wealth-maximizing guide shows you how to tap into the powerful secrets the wealthy have always used to protect their assets for themselves and their families. Legal entities and other sophisticated strategies, explained here in simple terms, can help you protect your money from taxes and lawsuits - just as the wealthy do. Trump University Asset Protection 101 gives you all the tools you need to protect your assets from taxes and lawsuits. In this book, you will learn: 

• How owning your own business can save you a fortune 
•  Massive tax deductions the rich use every day 
• Cutting-edge strategies to protect yourself against lawsuits
• How to apply business entities and tax structures to keep assets out of the reach of others
•  Why you must have an estate plan, no matter how young you are

I urge you to take advantage of Trump University’s special offer that can add this book to your success library today. CLICK HERE to reserve a copy of this powerful new book. If you act now, Trump University will send you a package that contains more than $300 worth of additional asset-protection tools from J. J. - all for just the cost of one book. With April 15^th fast approaching, I urge you to act today.  

 The good news is, you made money in 2007.  Hopefully, a lot of it.

 But do you understand that not all the dollars you earned are the same in the eyes of the IRS? Until you define the kind of income each of those dollars represents to the tax collector, you stand little chance of minimizing the money you give to Uncle Sam in taxes.

Let’s take closer look at how the IRS classifies your income - and explore some unique tax-minimizing opportunities you might be missing.

Earned Income - Okay, we’ll start with the most basic. Earned income is income that you earn for your personal services. It is subject to both income tax and self-employment tax (Social Security and Medicare). The most common type of earned income is W-2 wages (salary, etc.). However, net income from a self-employed business (filed on Schedule C) is also considered earned income. This is the type of income you want to minimize - or even avoid, if possible - because it is taxed most heavily.

Passive Income - Passive income generated from something other than personal services. It is subject to income tax, but is not subject to self-employment tax. The most common type of passive income is the income you generate from rental properties that you own. You see, the income you generate from rental property is not based on your personal services, but rather on the value of your property and the rental income that it generates. Passive income can also be generated by your personal involvement, or lack thereof, in your business. Certain business entities, such as limited partnerships, can create passive income.

Portfolio Income - Portfolio income is income you earn on your investments. This type of income includes interest, dividends, and capital gains. It is subject to income tax, but not self-employment tax. In this way, portfolio income is very similar to passive income. One major difference between the two is the ability to pay even less tax by generating capital gains. Currently, capital gains are taxed at a maximum rate of 15 percent. That’s right, a maximum of 15 percent! It is highly unlikely that this historically low rate will be around forever. Therefore, it would be a very wise move to analyze your investments to see if there is a way to maximize your overall return by taking advantage of this tremendous tax break while it exists.

Deferred Income - Deferred income is income that you do not pay tax on currently, but that you expect to pay tax on at some point in the future. That tax could be paid next year, 10 years from now, at retirement, or possibly never. Retirement plans are an easy way to set up deferred income; you take a current deduction today for the amount you contribute to your retirement plan. You will most likely pay tax when that money is removed from your retirement plan. However, that time will hopefully be many years from now, when you may be in a lower tax bracket than currently. Section 1031, or like-kind, exchanges are another way to generate tax-deferred income for real estate properties. In this scenario, you can sell a piece of property at a gain and defer the tax on that gain by acquiring another investment property. There are certain parameters you have to meet, but tax-savvy investors would be wise to know all the ins and outs of Section 1031 exchanges.

Tax-Free Income - Tax-free income is exactly that, wonderfully tax free. The primary tax-free income bonanza for most working Americans is experienced on the sale of their personal residence. If you use a home as your main, or principal, residence for any two out of the preceding five years, any gain on the sale of that home would be tax-free up to the first $250,000 of gain for a single filer - or $500,000 for married filers.

Often, investments that yield tax-free income, even though the returns may be lower, will have an effective rate of return higher than many after-tax investments. For example, let’s say you are doing well and are in a 35 percent federal tax bracket and a 5 percent state tax bracket, for a total income tax rate of 40 percent. You shop long and hard for a good money market rate at your local bank and find one willing to pay you 6 percent on your money. However, 40 percent of that income will be lost due to income taxes. Therefore, your 6 percent investment has an effective rate of 3.6 percent. That’s not exactly what you signed up for. You’ll do much better if you can find a tax-free investment that will return 5 percent. Adding a few thousand or more tax-free dollars to your portfolio can generate wealth at an amazing clip.

My purpose in giving this quick overview is to get you to begin to understand that your situation can change - if you allow it to! When you work for a company, it issues you a W-2. That is a classic example of earned income. You have no control over the type of tax you pay or the amount of tax you pay--unless you put some of the income into your company’s retirement plan.

But when you are self-employed, you have the ability to dictate what type of income you receive. That is only one of the reasons why I constantly push my clients to look for ways to generate types of income that yield preferential tax treatment. Armed with the right information, you can structure your income and emerge a winner at tax time.

The advice in this article is adapted from the new book Trump University Asset Protection 101: Tax and Legal Strategies of the Rich by J.J. Childers, with a foreword by Donald J. Trump. Published by John Wiley & Sons.