Van Carlson is a seasoned expert in risk management, delves into the essence of effective leadership through the lens of his extensive experience. With over 24 years in the field, Carlson's journey from navigating the 2008 financial crisis to tapping into the power of 831(b) tax-deferred plans. He offers invaluable lessons on resilience and strategic foresight.

Carlson articulates the critical role of adaptive leadership in times of economic uncertainty, illustrating how a well-structured risk management plan can serve as a cornerstone for sustainable business growth. Carlson's insights shed light on the symbiotic relationship between leadership and risk management, where making informed, bold decisions can transform potential vulnerabilities into strengths. His narrative reinforces the idea that proactive leadership, characterized by anticipation, innovation, and a commitment to learning, is crucial in steering organizations toward long-term prosperity and stability.

Want to learn more about Van Carlson's work? Check out his website at https://www.831b.com/.

Connect with Van Carlson on LinkedIn at https://www.linkedin.com/in/vancarlson/.

Key Points

• 00:01:51: Discussion on the personal impact of the 2008 financial crisis on Carlson and his clients, leading to the development of innovative risk management strategies.
• 00:04:04: Insights into the economic trends and Carlson’s strategic approach to risk management through the 831(b) plan, emphasizing its benefits for business owners.
• 00:06:10: Analysis of current economic conditions and predictions, with Carlson sharing his optimistic yet cautious outlook based on his industry experience.
• 00:13:32: Exploring the operational mechanics and advantages of the 831(b) plan, detailing how it serves as a crucial tool for efficient risk management.
• 00:15:20: Carlson discusses the broader implications of risk management for business leadership and the importance of strategic foresight.
• 00:20:55: Real-world applications of Carlson’s strategies are highlighted, showing the impact of well-managed risk on business growth and stability.
• 00:30:18: Closing thoughts on the significance of informed leadership and the potential of the 831(b) plan to empower business owners in uncertain times.

Transcript

00:00:09:17 - 00:00:35:14
Craig Andrews
Today. I want to welcome Van Carlson and has an extensive background in risk management with more than 24 years in the industry. Prior to founding 831(b), Van ran his own property and casualty firm for 15 years with many commercial business owners as his clients who saw the Great Recession of 2008 hit hard. And just like them, he was also affected by the sharp downturn in the economy.

00:00:35:16 - 00:01:04:16
Craig Andrews
During this time, he realized that there must be a better way to manage risk overall, and from that desire to improve business operations for both himself and his clients, along with his insurance background in risk management and finance. Ezra was formed and, you know, we're getting as we go into this today, we're going to get into some, you know, financial stuff, but we're not going to get bogged down into the financial stuff.

00:01:04:16 - 00:01:25:15
Craig Andrews
And I asked them before we started, So why should people care? And for the business owner, this is your rainy day fund on a tax deferred basis. So tune in and we're going to explore that a little bit further. Van, welcome.

00:01:25:17 - 00:01:37:21
Van Carlson
Hey, thanks for having me on your show. Really appreciate it. Always looking forward to conversations with folks like yourself. And you're very intuitive. So I'm looking forward to our conversation. So appreciate it.

00:01:37:23 - 00:01:51:21
Craig Andrews
Yeah. So the before we get into that, I mean, so to 2008, it hit you hard. Wrap some meat around that will hard look like. What did that mean?

00:01:51:23 - 00:02:14:17
Van Carlson
You know you know, I was the top 1% performer in traditional insurances property casualty insurance I sold it on. And you know, I've know I had over 6000 policyholders. I was fortunate enough to grow my agency in a way that, you know, you were all the hats in the beginning and the hats off. And the one hand I kept it was working with business owners on their insurance risk profiles.

00:02:14:19 - 00:02:35:14
Van Carlson
Helping them with their goals were comp, commercial, auto umbrellas, all that kind of stuff. And I really enjoyed that. I really enjoyed that work. And unfortunately, you know, I would say that we became friends and became friends and a lot of them are pillars in the communities and they knew one thing that is new leverage. They just kept leveraging themselves out and they had a good year.

00:02:35:14 - 00:02:55:23
Van Carlson
They just went out and bought more equipment. It's a big play that they knew and unfortunately they find it. They took the depreciation and they will take some taxes relief on it. But the problem is they just financed it and all they did was bet next year is going to be better than this year. And, you know, and then I saw a gentleman that had seven or eight of these things.

00:02:55:23 - 00:03:22:05
Van Carlson
He was an RV manufacturer. These plans that we're going to talk about, that he was able to pivot in a way that, you know, he he excelled. I mean, not only need to survive, but he excelled there during that downturn. And then that's where I thought this has to be. This has to be a better knowledge. This has to be more broader known tax code that gives business owners the advantages no different than big companies have been doing for a long time.

00:03:22:05 - 00:03:43:24
Van Carlson
And that's what kind of drove me to. I was fortunate enough to have my wife working for me. I sold my agency to her for a dollar. She she took it over. She was thrilled about it. She ran for like five years. And then we since have sold it. We actually sold it back in 2013. But you know, today we have over 800 participants in our plans today.

00:03:43:24 - 00:04:04:04
Van Carlson
And now we call ourselves a 16 year overnight success story. But, you know, a lot of grinding in between. A lot of times you didn't you know, we had to take a lot of things had to go into to play to get where we're at today, obviously, like most businesses. But no, it was just one of those eye opening situations for me that, you know, these are risk takers.

00:04:04:04 - 00:04:13:24
Van Carlson
These are entrepreneurs. How do we how do we how do we take some of that and make it more effective and efficiently utilizing codes like day through and be tax code?

00:04:14:01 - 00:04:32:21
Craig Andrews
Yeah. Yeah. And 2008 was I mean, certainly a hard time for a lot of businesses and it just I'm curiosity what's your take on where we are economically I hear some people say hey the economy's doing great. I hear some people say it's doing rotten. What's your perspective?

00:04:32:23 - 00:04:54:22
Van Carlson
You know, we had a great fourth quarter last year. We re had a record year in our company last year. So we were a lot of business owners all over the country have over about 150 representatives that represent our products. We didn't know how it was going to go, you know, because you you know, but I will tell you this, I think there's still a lot of money out there, a lot of businesses sitting on money.

00:04:54:24 - 00:05:18:11
Van Carlson
Last time I heard, there was $18 trillion of cash. So I think there's a bit of a head fake with the recession. I did think 2024 is going to be a rough year. I don't think that way anymore. I do think people are being more conservative in their what they're willing to spend on their expenditures this year. And that has more to do with the psychological of the election year.

00:05:18:13 - 00:05:40:14
Van Carlson
So there may be some rumblings there, but I don't see I don't see a downturn. The reality is people all that money that got given out through PGP and RC programs have all filtered to the top. And what I mean by that are big companies, people that own things. They ended up with all the money and you know, those people have a way of deploying that money back out.

00:05:40:14 - 00:06:04:12
Van Carlson
They don't sit on it too long. Interest rates obviously have incentivized people to hang out as well. You know, you're getting 5% on money with relative to no risk. So I also put a lot of pressure on the insurance industry as well. So but I think 2024 is going to be one of those normal election years. But there'll be opportunities out there and you can stick your head in the sand and worry about the future of who's ever going to run this country.

00:06:04:14 - 00:06:10:07
Van Carlson
But I think you're you might be missing some opportunities if you did. So. Yeah, that's my take.

00:06:10:09 - 00:06:43:00
Craig Andrews
You know, we used to have a client that was a financial advisor and the and this is going into the 2016 election and you know one of the pieces of content that we helped them put out was, you know, as you said, people get worried about the election and they we went back through like 80 years of data and the conclusion was there's no real impact, whether it's Republican or Democrat, Republican, Republican president.

00:06:43:02 - 00:06:51:19
Craig Andrews
It just the at least in terms of the stock market, it continually goes up regardless of the administration.

00:06:51:21 - 00:07:09:08
Van Carlson
Yeah, And that's the I mean, fear and greed drive. Everybody drove the emotions of people. Right. And so I think, you know, the and the fear part of being unknown and that's that's what's that's what it's more of a psychological thing than anything. Yeah that makes sense.

00:07:09:10 - 00:07:35:21
Craig Andrews
Well, and as a me, as a marketer, one of the things I know very well is most most decisions are made out of fear. And and even if it looks like an aggressive decision, you know, so we talk about pioneers, people who are their early adopters, even their decisions are made out of fear. Their fear is that they won't be the first one to harness the latest technology or something, and then somebody will pass them by the name.

00:07:35:21 - 00:07:36:19
Van Carlson
Yeah.

00:07:36:21 - 00:07:51:17
Craig Andrews
Yeah. So fear just drives some decisions, but something else she said, going back to 2008 is you saw people doing well. So even in the Great Recession, you saw people doing well exceeding.

00:07:51:17 - 00:08:12:03
Van Carlson
I mean, here's the thing about when your competitors are making money, I mean, when you're making money, there's more good chance your competitors are making money, too. And and, you know, to me, it's about hedging the downside. And if you can hedge on the downside, you, you know, you can come out of that trough and that's really you know, you make your money out of it coming up out of the trough.

00:08:12:03 - 00:08:31:13
Van Carlson
And you saw that really in 2010, 12. I mean, what was a big deal right back then? Everybody said, golly, if I had cash now, man, what would I have done with that cash? I could have killed it. I could have a property for, you know. And what's crazy is what I've been witness to is everybody kind of pulling back into this thinking the recession was going to hit and everybody started hoarding cash because why?

00:08:31:13 - 00:08:47:19
Van Carlson
They they you know, they survived. eight, nine, ten. They realized, man, if I had cash sitting on the sidelines, I could take advantage of the marketplace and everybody. But the problem is everybody was doing that. And so that's why I don't think the recession is going to come out. And it just everybody was thinking the same thing.

00:08:47:19 - 00:09:04:19
Van Carlson
It's just we're going to pull back. We're going to conserve some of our cash reserves and we'll wait for this pullback. And now that the I don't believe the pull pull back is going to happen, it will be certainly interesting to see how things go in the next 18 to 24 months for sure, with interest rates being where they're at.

00:09:04:19 - 00:09:21:18
Van Carlson
But even that, I think that's manageable, too, for business owners. Obviously, commercial real estate is going to have a little bit of a push back, but it should, you know, but the job, the job creation is still going up. In fact, I think it is reported today, though, inflation's up higher than they expected today on the report from February.

00:09:21:18 - 00:09:46:11
Van Carlson
So I thought that was interesting. And so, you know, unfortunately, you know, not to get too much in the weeds here, Craig, but, you know, I do see a disparity still happening. And mostly, you know, the middle class is going to be stretched and that's where it's really where the big concern should come from, from all of us is the consumers on the middle class level where, you know, are you going to slip more into, you know, a poverty line?

00:09:46:11 - 00:09:59:12
Van Carlson
Are you going to slip in or are you going to have to push up into your income brackets? Because I think middle class is going to be the one to get it slaughtered with inflation, unfortunately. Yeah. It's going to force you to make a decision what you got to do.

00:09:59:14 - 00:10:01:00
Craig Andrews
Yeah. So that's sad.

00:10:01:02 - 00:10:08:00
Van Carlson
Yeah, it's, it it. But I think it's an evolution of country economies. Truthfully, I think, you know.

00:10:08:02 - 00:10:31:21
Craig Andrews
But yeah, well, you know, the American middle class was largely built, you know, 80 years ago and off manufacturing. And at some point we decided that we were a service economy rather than a manufacturing economy. And so in some ways, I feel like we've been running on borrowed time.

00:10:31:23 - 00:10:54:19
Van Carlson
And, you know, even if they got rating, you know, pay increases over the last couple of years, it hasn't kept up with inflation. It maybe kept them at some some people at par. But, you know, long term, I think, yeah, I mean, it's a concern for sure. And that's why, you know, I tell people all the time and, you know, goes, we should be going back to running our own.

00:10:54:24 - 00:11:12:01
Van Carlson
If you can get into your own business, you should do that because that's the only way you're going to make money. I make the when I make presentations, I always tell people what job stands for jobs. It stands for just over broke. If you if you got a job, that's all you're going to be, in my opinion, in life.

00:11:12:01 - 00:11:38:02
Van Carlson
Unfortunately, if you have a career or you have a business, you have a whole lot more opportunities to go out and strike out to be the upper middle class, have the opportunity to give yourself better jobs, jobs, a job, and, you know, unfortunately, you know, you know, we were just of I before we went on the air recording in, you know, a lot of those jobs, you know, all those things are going to play out in the next couple, several years.

00:11:38:02 - 00:11:53:18
Van Carlson
And how do you position yourself? You know, people need to be thinking down the road. And, you know, unfortunately, I don't know if there are how many people are doing that. And so but always courage people to jump out and do your own business. You know, turn to the 1900s, 80% of the American citizens own their own business.

00:11:53:18 - 00:12:14:00
Van Carlson
By the end of the the 20th century, it reversed. And that to me is probably a driver that had to do with manufacturing and going to service. But I think there's more of an opportunity than ever to own your own business today. I encourage business owners or anybody to jump out and do it, you know, strike out and get after it.

00:12:14:00 - 00:12:16:12
Van Carlson
And only one way to do it. And that's by doing it.

00:12:16:14 - 00:12:27:00
Craig Andrews
Yeah. Now, you mentioned this thing called an 831 B, Yeah. What's what's, what's the simple explanation when 831 B is, you.

00:12:27:00 - 00:12:47:22
Van Carlson
Know, simple explanation for us it's very similar to the 41k that allows business owners to expense, you know, for one case for your retirement and your employees retirement. 831 B is just for That's right where it's at in the tax code no different than the 41k it allows you to expense money out of your operating company and dump it into an 831 B plan.

00:12:48:03 - 00:13:13:19
Van Carlson
Both the 401k and 831 B stays tax deferred. One is for retirement. 831 B is for self insuring risk. What we what we talk about risk. You transfer a risk by buying an insurance policy, you're paying a premium. You're transferring that risk to an insurance carrier. They're going to handle the fire in my building. There's a lot of things you're going to retain, unfortunately, on your books, and we call that an unfunded liability.

00:13:13:21 - 00:13:32:01
Van Carlson
And then we get into the thing called risk financing. How do you want to risk finance? Do you want to use after tax money or pretax money? They 31 B tax code came into existence in 1986 and we were both very young men, I'm sure, at that time. I think that's I want to say I see that's the year I graduated from high school.

00:13:32:03 - 00:13:57:06
Van Carlson
But the 1986 tax reform Act was by far the largest reform act in our lifetime. It changed a lot of the rules. But the cool thing was this code got introduced back then, and what was happening then was for farmers are finding themselves self-insurance for crop insurance and also very similar. What's happening in today's almost identical what's happening on today where you have insurance carriers pulling out of pulling out of states.

00:13:57:08 - 00:14:27:16
Van Carlson
They're adding more exclusions, they're limiting coverages, they're requiring you to take on a larger first dollar loss on your roofs. For example, if you own a commercial buildings, you're finding yourself having more unfunded liabilities on your on your books. And you realize even with traditional insurance, then you add in supply chain risk, brand protection, cyber risk, dispute resolutions, all the other complications of political risk today are significant.

00:14:27:18 - 00:14:50:22
Van Carlson
And then you have a thing called PGP, right, where we tell business owners that was a straight up business interruption policy. However, your traditional insurance was never going to cover that because you're building didn't catch on fire and you weren't displaced. So business interruption was going to be covered. Was it going to be triggered when the government says, hey, you're going to be shut down or you're just not going to have enough customers coming to your door to keep your doors open, Traditional insurance is going to cover that.

00:14:50:22 - 00:15:11:08
Van Carlson
So that's where you get into a complete business interruption risk. And we have the ability to foster all that. Now, what we do is sorry, we're a41k minutes trader. We make sure you minister that through a B plan to make sure that we can keep the money deferred. And there's obviously rules and regulations like every tax code out there.

00:15:11:10 - 00:15:20:02
Van Carlson
There are rules and regulations that and our job is to make sure you follow those rules and regulations so that that's primarily what we do as a company.

00:15:20:04 - 00:15:29:15
Craig Andrews
And so there's one thing I'm a little bit confused about is, is an 831 B, another unfunded liability or does it protect against unfunded liabilities, which.

00:15:29:15 - 00:15:48:09
Van Carlson
What you're going to do? So this year you can put up a $2.8 million a year into the 831 B plant. So you're going to expense it at your operating company level and you're going to dump it into this plan. They 31 B to says, hey, you're going to when you do the tax return for this vehicle, it's going it's going to keep those premiums tax deferred.

00:15:48:09 - 00:16:10:21
Van Carlson
So you're expensing it. Add your operating company, you're dumping into an 831 B plan that money, that entity does not pick that up as income. So now you're able to do a lot of things with that right now. So just like you said earlier, you know, able to build that rainy day fund. And those are two substantial advantages you get because like I said earlier, you know, you the is it's risk financing.

00:16:10:21 - 00:16:29:20
Van Carlson
Do you want to use after tax money or pretax money to fight the fight or to deal with the risks that you that you're retaining on your books? Because you know after tax money he says pull cash flow out of your business and you start to pull cash flow out of your business on unexpected expenses. You know, you've taken a risk for the company.

00:16:29:20 - 00:16:46:24
Van Carlson
I mean, I don't say it all the time. Cash flows, the blood of your business. It keeps the body moving in your side, your business. Once it starts to drain down, you're you're putting your business at risk. And that's really where that's where the risk mitigation comes in. And we do a full on risk understanding of our clients.

00:16:47:05 - 00:17:07:17
Van Carlson
We work with different industries all over the country. All the risk profiles for the different industries are different, obviously. And we help, you know, as being a risk manager is first and foremost, we help clients. We got our clients through that process. Unfortunately, if you've been in business long enough, you know, just listening to the clients, you know, hey, you know, I didn't have this covered.

00:17:07:17 - 00:17:33:08
Van Carlson
And here's why. How do I get that covered going forward? Because that's that's what's keeping me up at night. And we get a lot of those conversations, unfortunately. And right now in the world we're in today, it's it's coming in on traditional insurances. A lot of exclusions are coming in. Cyber is getting much more complicated as far as from just trying to manage the cyber risks that you've taken on as your business owner, because we've all kind of you know, we've all got gone out and gather data for our clients.

00:17:33:08 - 00:17:51:18
Van Carlson
We've got, you know, done all the things we were supposed to do. And now, now that we have all this information, how do we protect it more efficiently, effectively? And that's a complicated issue in itself. And we deal with it all the time, unfortunately. So we're building these these tax deferred buckets of money to manage these risks more effectively and efficiently.

00:17:51:19 - 00:17:59:06
Van Carlson
That's that's what they aim to really be, is just part of the tax code that you can collect under that no different than the 41k.

00:17:59:08 - 00:18:08:24
Craig Andrews
Is that so if we look at entity type like C Corp s Corp's LLC is who which of those can take advantage of it, which cannot.

00:18:09:01 - 00:18:32:07
Van Carlson
They can all take advantage of it. So I should mention and I'm just going to add this box is 831, B is a C Corp itself, and it has to look and feel like an insurance company. So that's so we're going to have shareholders at C Corp. The operating company could be the shareholder of that C Corp are we mimic the ownership of that C of that S Corp or LLC can own similar to this to the C Corp.

00:18:32:07 - 00:19:02:11
Van Carlson
The C Corp is an 831. It's going to have its own tax returns. It's a elected on an 11 $0.20 C tax return and it's asking for an 831 B deduction, which allows them not to pick up the premium inside that vehicle as income. So now you're going to defer the income in that vehicle and that allows you to build up the advantages the insurance industry as a whole, as you're probably aware of some of the strongest financial institutions in our country and the way their taxes differently than other entities.

00:19:02:13 - 00:19:07:02
Van Carlson
And that's what gives them a lot of advantages out there in the marketplace.

00:19:07:04 - 00:19:32:10
Craig Andrews
So one of the challenges with, you know, let's say an S Corp is the you know, the profits flow down to the you know, to the individual. And so one of the challenges is, well, hey, if I want to if I want to put some money away for future growth or future downturns, basically I have to be taxed on that money.

00:19:32:10 - 00:19:47:19
Craig Andrews
And if I'm going to be taxed on that money, I'm I won't pull it out and put it you know, put it in my account by doing this safe. 831 B, that allows me to put the money aside without being taxed on it. Is that correct?

00:19:47:21 - 00:20:14:07
Van Carlson
Yeah. You're able to expense it at your operating company level. No different than what I was saying earlier about buying equipment for the accelerated depreciation. You're now able to expense it if you're operating company level and and put it into this vehicle. So so those are substantial advantages, right? I mean, those are game changers for business owners. And I think to your point is, you know, the ones that that gravitates with is huge.

00:20:14:07 - 00:20:37:24
Van Carlson
I mean, I've seen it make such a substantial difference in business owners mentality, even when it comes to risk. Maybe even if they do this program long enough, you know, they maybe even take on more risk or, you know, one of the things I say quite often is one of the best compliments I get as a risk manager that, you know, a business owners could say to me is, Van, I just sleep easier at night knowing I've done your program.

00:20:38:01 - 00:20:55:20
Van Carlson
And I think there was probably no more proof than that, that when COVID hit, we were able to respond quicker than the government did as far as getting money out to our business owners. And, you know, there's there's process and procedures and I don't want to to your point, we don't need to get bogged down on the details.

00:20:55:20 - 00:21:17:02
Van Carlson
Just understand there's rules and regulations of this. But that's our job. That's that we're the professionals in this space. Like I said, we have over 800 businesses right now actively in our in our in our company. I mean, 808 31 B plans we manage currently and we're on we're on a game plan to double in the next three years.

00:21:17:02 - 00:21:37:09
Van Carlson
And I think we'll I, I feel very comfortable we're going to get there maybe even sooner than I think. But no, we're you know, and again, this is just risk management, but it gives it gives the ability for businesses owners to act no different than big companies. Do you know, we're talking about, you know, downturns and so forth.

00:21:37:11 - 00:21:57:06
Van Carlson
That's really where I saw that gentleman in eight. I mean, because he was able to build up these reserves and surpluses, he was able to pivot in a way. He showed up at the auctions and bought his competitors raw materials for $0.10 on the dollar, bought the plants. It did what smart money does. And this is where, you know, you know, you talk about the guys like Warren Buffett and stuff like that.

00:21:57:08 - 00:22:20:10
Van Carlson
Warren Buffett is not a stock tip picker. He's a company buyer. But also he owns a lot of insurance companies. So he's OPM guy. He's other people's money, you know, and this is no different. And that's really where I really wanted to drive home and especially the clients I had that I witnessed in eight or nine going on business, unfortunately, that were forced to be auctioned off because covenants alone started to mean things with banks right.

00:22:20:10 - 00:22:43:22
Van Carlson
And that's never going to change. Banks have their role to play to. They're so just doing this program. And of course I always tell business owners, if you're having a good year, just to take a little bit off the top part off the side, not only is it good risk management, it's just good business, you know, And truthfully, business owners have never been incentivized to say they have always been incentivized to spend money.

00:22:43:24 - 00:23:00:10
Van Carlson
And that's something that we're going to change in the future mentality of business or business. Take too much risk to do what they do, not to be able to take advantage of tools like this. And here's what I would say. It is a tool of tool. That's all it is for the right clients. A great tool, but there is no silver bullet.

00:23:00:10 - 00:23:17:19
Van Carlson
There's again, rules and regulations, There's distributions of risk. You're got to share in other people's pooled risk. There's going to be that's the that's the the nugget I will leave with not go down in that that's as far as we'll go down on that conversation. But there's rules and regulations to it. So but I think you owe it to yourself.

00:23:17:19 - 00:23:34:19
Van Carlson
You owe to your employees, you owe to the business you started and run that you ought to be looking at all these types of tools. And I think we're the company to help you, educate you and bring you up to speed and you can make your decision move forward or not, but have an awareness to me is huge.

00:23:34:21 - 00:23:56:10
Craig Andrews
So again, keeping it a little bit of a high level. I do have a couple of questions about mechanics of this. So let's say I have $1,000,000 that I don't want to take as a as income or and I want to move it over into this 831 day. If I move that million dollars over, is that what you're calling a premium?

00:23:56:10 - 00:24:14:15
Craig Andrews
I'm making a premium payment. Okay. So I move the million dollars over and then next year or two years from now, I have a need for that money. When I move it out, obviously there's going to be fees or some expense to moving it out.

00:24:14:17 - 00:24:34:05
Van Carlson
It depends if it's coming back through a claim process. It's just part of the I mean, we obviously charge fees to manage the fees and we charge premium fees. And there's again, all that fun stuff. I will just tell you this. We're our clients will win every year based on the tax arbitrage. Memorize it as a C Corp versus ordinary income.

00:24:34:05 - 00:24:56:10
Van Carlson
So even if you want to take it as a dividend, take a dividend out, it's a qualified dividend you can take out on the back end of these things. You know, if it's a year or two years down the road like like you just said, the other one is the claims process. You know, there's d'utilisation there's you know, if you have a claim, the money would flow back into your operating company and and make you whole no different than any other insurance policy that's really designed to do.

00:24:56:10 - 00:25:18:10
Van Carlson
Right. So again, we're going to look at risk that you're not insuring traditionally, you're just retaining on your books and this is the types of things you deal with. And believe me, we deal with it every year. I mean, we deal with it every every week now, because our pool, our clients pools are so big today that we're having claims weekly on certain unique situations.

00:25:18:12 - 00:25:45:06
Van Carlson
But that's really how that works. Again, it's a C Corp. The only thing it's getting taxed on is investment income. So your financial planner can manage those funds no different than their managing the form of cash reserves, but it will be taxed on realized gains at the corporate rate. But again, you as a shareholder, you can take a dividend out, you can borrow a part of it out no different than the for one K, you can borrow part of the funds out of certain situations.

00:25:45:06 - 00:26:10:13
Van Carlson
And then also claims obviously paying big part of that. But that's really how that works. Now, the million dollars there has been actuarial, how much money you can put into these things. Again, this is the rules that we have to play by. I just because you can put a $2.8 million a year way doesn't mean you get to there has to be some actuarial put aside in some methodologies on your on how much premium you can put aside in one of these vehicles.

00:26:10:15 - 00:26:17:00
Van Carlson
Those are all again, our rule, the way we set it up, the rules that we deal with and we we help the clients kind of maneuver through that again.

00:26:17:00 - 00:26:41:23
Craig Andrews
So Okay. So, so I have a and let's say that that million dollars, I'm able to put that in so when I move that million dollars over, there's some premium fees that that pays that pays you. So there's a cost of moving the money in once the money's over there. If I heard you correctly, it can accrue interest, it can gain in value.

00:26:42:00 - 00:26:43:08
Van Carlson
It can be invested.

00:26:43:10 - 00:26:57:22
Craig Andrews
It can be invested. Yeah. Yeah. And then I pay as a business owner, I pay capital gains tax on that one. The capital gains of that investment, do I pay that on an annual basis or only when I realize the capital gains.

00:26:58:02 - 00:27:16:24
Van Carlson
Only only when you take it out and a dividend are capital gains. So you can declare dividend at the end of at the end of the year, we again, as administrators let you know what's eligible to be dividend if you choose to or you can just simply leave it in there and those premium dollars stay deferred as long as as long as that vehicles are looking at.

00:27:16:24 - 00:27:36:02
Van Carlson
831 B, it's going to continue to stay deferred. And that's really where that's really where the power of the program starts. And, you know, we tell business owners this is, you know, should be look at this as a five year plan that you can contribute. The nice thing is there's years when you can't contribute, which is another thing that happened in 0809 2010 that I witnessed.

00:27:36:02 - 00:27:53:03
Van Carlson
They had these programs. You know, it's going to be very minimal cost to maintain the plan. Their nose down years are just simply you can't contribute one year to the plan. It's not going to kill you. And so those are things that we kind of, you know, were able to maneuver to make sense for business owners to do our program.

00:27:53:03 - 00:28:09:20
Van Carlson
And we were very conscious of our fees. And so that's that's where I think that's where we pay. We're able to leverage best in our industry. We are the largest manager of 831 B plans in the country, and it has a lot to do with our fee structure.

00:28:09:22 - 00:28:26:10
Craig Andrews
Okay. And so now let's let's play a scenario where I move that million dollars over. Let's say it grows to be $2 million, and then five years from now I sell my business. Yeah, I have to dissolve that eight, that 831 B at the same time.

00:28:26:12 - 00:28:41:04
Van Carlson
No, we'll let you do over three years. The other thing that we do with selling businesses, we do it on the back end as well. We call it transactional risk. A lot of business owners today are going to if you got blue sky, you're going to you're going to finance that. Now you get some stroke in your check for the whole thing, Right?

00:28:41:06 - 00:29:12:21
Van Carlson
So unfortunately, there's rep and warranties when you go, You know, selling a business today is complex. It's always been complicated. It's gotten much more complicated today due to brand protection. You know, do your brand, your contract, intellectual properties, your rep and your reputation and warranty in the community, you're selling all that, right. And so if it doesn't come to fruition and you may be sued or held accountable of that, again, you're going to want a rainy day fund in and some days or sometimes a war chest, unfortunately, because you're being sued and now you're using utilizing these types of funds.

00:29:12:21 - 00:29:36:10
Van Carlson
So there's a lot of things that go into the selling of the business. But ultimately, if everything goes smoothly after three years of, you know, not having that business anymore and not setting new risk into it, we'll ask you to hey, we're going to need to close this thing down and then take it out as capital gains. But again, we work with other client, you know, a lot of business owners, other trusted advisers, and they come up with their own strategies and we bless that.

00:29:36:10 - 00:29:54:12
Van Carlson
If not, we'll tell them why we're not blessing it. And again, we're we're moving, you know, consulting with business owners all the time on how you'd want to exit out of these plans. But I think for me, it's a a game changer for business owners on a lot of different levels beyond just the risk management at that point in time.

00:29:54:14 - 00:30:17:23
Craig Andrews
Excellent. Well, this is Ben. This has been really interesting. I had never heard of these 830 ones and and that's powerful. And I like a rainy day fund when a tax deferred basis so. Well, if somebody wanted to learn more about these, how would they reach you?

00:30:18:00 - 00:30:44:13
Van Carlson
You know, I would tell you to go to 831 Buy.com that's our domain. It's an educational website. It gets you going there. My mind's van at 831 B dot com if they want to reach out to me via email to learn more. But that's the best way to start is, you know, get get educated on this code and you know you're not I wish you I wish you were unique when you say that you didn't know anything about this code, but you know, it's been around for 38 years.

00:30:44:15 - 00:31:04:15
Van Carlson
It's been a tool that's utilized by big, big companies for a very long time. And over the last several years, we were able to price our product in a way to where we can bring it down to the to the mom and pops and the the guys, the bootstrap. The guys have done it on themselves and the business owners that are taking a ton of risk out there to do what they do.

00:31:04:17 - 00:31:16:09
Van Carlson
You know, you owe it to yourself to understand these types of products and what's eligible, what's eligible out there for you. And again, this is just you know, education is power, so.

00:31:16:11 - 00:31:19:24
Craig Andrews
Well, that's great. Thank you for sharing this. On leaders and legacies.

00:31:20:01 - 00:31:20:14
Van Carlson
Thank you.