Bitcoin Dynasty Trusts Launch: Generational Wealth & Legacy Planning

Jackson Mikalic (00:02.707) All right, we're live. Good morning. We have a special episode this week because OnRamp is launching Dynasty Trust services in partnership with First Covenant Trust and Advisor. And we have Paul Hoylman joining us, who is a partner and strategic advisor to First Covenant. And I'm also joined this morning by Brian Cabellus and Michael Tanguma of OnRamp. Gentlemen, good to see you. Excited about the launch of this partnership. And Paul, thank you for joining us. How are you doing, Paul? Paul (00:31.045) Yeah, doing good. Thanks for having me today, Michael Tanguma (00:34.542) Good morning. Super excited for this conversation. I know it's early Monday morning off the weekend. This will be released Thursday morning with the launch of the product. But I think the entire team personally is super excited for this conversation and for this to be out. Been working in this industry for about five plus years and there's been no shortage of gaps and there are slowly every year and every month being developed but one that has still retain as a very large gap has to do with estate planning trust planning and how do we preserve this wealth that we've been securing for You know years if not decades into the future So super excited for Paul to share his story and what we're working on with First Covenant Jackson Mikalic (01:13.427) Likewise, and Paul, I'll let you know before we get into this conversation that we have lot of conversations with clients and prospective clients and these topics come up very frequently. So it's a much needed product in the Bitcoin industry and just the wealth management, know, estate planning industry in general. So thank you for the work that you and the team are doing and excited for this conversation. Paul (01:35.793) Yeah, absolutely. Exciting. Jackson Mikalic (01:38.291) So the best place to start is Paul, why don't you give us a better sense of who you are, your background professionally, and then if you could kind of merge that with your interest in Bitcoin, that would be great place just to level set and give the audience a better understanding of who we're speaking with today. Paul (01:53.701) Yeah, sure. So, you know, early career days, I started out in traditional finance, you know, pretty basic insurance wealth management stuff. Got my series seven and 66 registrations, went on to join an RIA firm and then got my CFP certified financial planner designation. So I spent a fair amount of time in, you know, traditional wealth management and things of that nature. And early on had a chance to join a South Dakota Chartered Trust Company and, you know, was interested by that. Didn't know a ton at the time about South Dakota trust structures, estate planning, ultra high net worth stuff. The more basic wealth management stuff, you know, I think a lot of people know, and it's a little more broadly understood. And I was really curious, you know, what do you do at the ultra high net worth levels, what do you do at the end? What's that stuff? It just was an interesting niche that I quite frankly didn't know a ton about at the time. So, joined First Covenant Trust, got a chance early, was one of the early employees, built out a lot of the operational and trust administrative systems and processes, became a partner there early on and, you know, continue to be a partner and strategic advisor to the company today. But, you know, in my time there, worked with a lot of ultra high net worth families in day to day administration, you know, where we had funded South Dakota Dynasty Trust and we were, you know, doing things on regular basis. Got to work on the strategy and the planning side, putting these structures into place. So just got to be involved in a lot of different areas and it was really interesting and a really good learning experience. You know, and on the Bitcoin side, I would say for me, it started in those early financial planning days and studying the markets, you know, started to go down a little bit of a rabbit hole looking at quantitative easing and how, you know, there was a pretty strong positive correlation between some of the quantitative easing periods that followed the great financial crisis and S&P 500. Paul (04:12.077) Found Bitcoin, but I didn't. So, you know, I found gold and, you know, started to go down that gold rabbit hole and thinking about debasement and what's happening. So, you know, if you go down that gold rabbit hole, you run into a lot of hurdles with custody. You know, how do you want to own gold if you're going to own gold? And so, you know, I think, you know, a true gold bug would not have any interest in the GLD ETF. Effectively a paper claim on gold. Do you have transparency there? If we have a systemic crisis, do you actually own gold? And so, how do you own gold? Do you take physical custody of it? I mean, you can't keep it at your house, so do you outsource it? What do you do with it? And so, that was sort of my early, I guess, struggle with what to do. And so then, transition that to Bitcoin and Bitcoin is effectively digital gold on steroids and you can do a lot more with Bitcoin than you can with gold. But I think thinking about Bitcoin custody from that gold lens is a little bit helpful because you've got to think about what do you really want to own? Like, you want to own iBit? Do you want to own ETF? For some people, maybe that's okay, but I think if you really want Bitcoin exposure, the best thing to do is just own Bitcoin. And so then you go down that rabbit hole of, well, if you're going to own it, how do you own it? How do you custody it? Things like that. And so, you know, that's what led me to find you guys at OnRamp and, yeah, excited for, excited for the dynasty trust side of things. Jackson Mikalic (05:53.257) [Discussion of custody, counterparty risk, and estate planning for Bitcoin] Michael Tanguma (06:51.106) Yeah, definitely. Thanks, Jackson. And Paul, I think coming from the gold side, it predisposed you to understanding counterparty risk and thinking about things from first principles. I think ultimately we have a lot of the legacy world kind of being mirrored over into the digital asset world. So net new incomers to Bitcoin exposure are fine with the ETFs. But as you said, there's no shortage of reasons why you would want to own and secure it in best-in-class ways. And then I think that ties into legacy planning because as you plan or manage and hand that asset over to your family or loved ones, you're gonna want the most optionality when it comes to being able to deliver, lend against, or if we plan to use Bitcoin in other ways, having an ETF doesn't allow for that. So that makes complete sense. It'd be helpful just to share a little bit about what makes South Dakota so special with trust and dynasty planning. Paul (08:48.557) Sure. I think South Dakota is widely respected and known as the best situs for dynasty trusts. Ultimately, with Bitcoin, at a certain level, if you have a lot of Bitcoin and expect that appreciation you're talking about, if you have a lot today, you're to have a whole lot in the future. At some point, your trust effectively becomes a dynasty trust. South Dakota has no rule against perpetuities, meaning trusts in South Dakota can last forever. Whereas, you know, most other states have some period of time where the trust has to dissolve no matter what. South Dakota has really good directed trust statutes and that's probably a new concept for lot of people that aren't in the trust world, but with directed trust, when you create your trust, you can effectively appoint different people or firms or what have you as the investment advisor of the trust or the distribution advisor of the trust instead of the trustee. South Dakota has some of the best decanting provisions, which effectively allows you to modify an irrevocable trust over time. South Dakota also is one of the best states for domestic asset protection trust. Paul (29:21.681) Sure. Yeah. I mean, there's lots of different kinds of trusts. Two of the big ones that come to mind to me for Bitcoin holders are just self-settled asset protection trusts on one hand and dynasty trusts on the other. Somebody that would benefit from a self-settled asset protection trust is just somebody that has a significant amount of Bitcoin that wants asset protection meaning from lawsuits, creditors, divorce. The Asset Protection Trust - you're creating a South Dakota trust that you are the beneficiary of. On the other hand, dynasty trust - you've got somebody that's maybe married, have kids, grandkids, and they want to solve the estate tax side of the equation. Paul (34:35.131) Somebody with a hundred Bitcoin today worth 11 and a half million roughly. Conservatively, they need to live on $100,000 a year. They've got 20 years until they die. And at the time of death, Bitcoin's going to be worth a million per coin. Without planning, their portfolio should be worth around 93 million at the date of death. Without planning, they can leave 22 million to their kids without any estate taxes. But after 22 million, they're going to pay a 40% tax rate. That results in a $28.5 million tax liability. If we plan and get that Bitcoin out of the taxable estate now, your trust is worth 93 million at your date of death and because all that growth happened outside of the taxable estate, there's no tax liability at your date of death. All 93 million passes on to the next generation. Paul (46:47.063) The trust can borrow against Bitcoin. It comes down to how we structure the trust. A trust can collateralize Bitcoin, can borrow against it. South Dakota has no state income taxes. South Dakota is the most private place to have a trust. There's no public disclosure of those trusts. If somehow the trust does get into a litigation, court documents are automatically sealed. Paul (49:14.953) With OnRamp, you get the on-chain transparency, you get fault tolerance with the multi-institution custody vaults. You have the transfer on death designation for somebody that maybe doesn't have millions of Bitcoin and is not ready for a South Dakota trust. But as your stack gets bigger and as Bitcoin appreciates, and we're talking about millions, not thousands or hundreds of thousands, you have to start looking at these other structures to how to safeguard and how to own it. It's just materially a better way to own it. Paul (58:13.002) An institutional legal framework to protect what you've been able to accumulate. Michael Tanguma (58:19.938) Yeah, it's very well said. For any listeners that want to learn more, you can go to the website or you can book a consultation. Jackson Mikalic (59:50.828) Well, thanks Paul. I'm excited to kick off this partnership and we'll be doing a lot of calls together, I'm sure with clients. Thanks for the time today. Excited to help some people out here. Brian Cubellis (01:00:03.701) Thanks, Paul. Michael Tanguma (01:00:03.864) Thanks Paul.