Are you a new crypto millionaire? If you've made millions investing in digital assets you might be wondering... what happens after you've hit it big? In this video, we outline the 10 crucial steps to take after a major liquidity event in crypto. Whether you're cashing out or planning for long-term growth, these actionable tips will help you protect, grow, and preserve your wealth for the future.
This video is your roadmap to financial security and legacy-building after achieving your crypto milestones.
This video is your roadmap to financial security and legacy-building after achieving your crypto milestones.
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LifestyleTranscript
00:00What do you do after you've hit it big in crypto? In this video, I'm going to walk through the 10
00:06essential steps that you need to take after a major liquidity event in crypto. Whether you're
00:11cashing out or thinking long term, holding your assets, these steps will help you protect,
00:16grow, and preserve your wealth. So let's dive in. All right, first things first, we have to
00:23establish a family compass, charter, or constitution. So you might be thinking, what is that? How does
00:29that work? It's really the long term vision for your wealth, where you want to go, you're deciding
00:34if you want to do lifestyle stuff, you know, enjoy it while it's here, you're not really leaving
00:38anything to anybody else. Maybe you don't have kids or beneficiaries or people you want to take
00:42care of, and you want to maximize lifestyle. Maybe you want to set up a legacy, right? You want to
00:47have a family office, you want this to go on for generations, the next 100 years. What's that going
00:52to look like? How are you going to build out? What's the mission of your family? All those things. Or
00:56maybe you have philanthropic interests, okay? Maybe you want to give back, you have something on your
01:02heart that you've had an experience in your life or a loved one go through that you don't want other
01:07people to deal with. And you want to set up a foundation, you want to make donations, you want
01:11to drive benefits for people so that they don't have to experience those things. So that's kind of
01:17high level. What does each one of these include? Well, you're going to look at core values. What are the
01:22principles that guide your financial decisions? What's your North Star? You're going to have a
01:26mission statement similar here. What's the purpose of your wealth? Is it for security or philanthropic
01:32purposes, lifestyle, legacy, all those things I mentioned before? And what are your goals? You're
01:36going to determine milestones like funding education, supporting charitable causes, or growing the
01:42investments at a certain rate. And then you're going to look at roles and responsibilities. Make sure
01:46everyone in your family knows who they are, where they sit, what their part is in managing the wealth.
01:52So this step ensures that every decision you make is aligned with a long-term vision. Without it,
01:58wealth can quickly become confusing and a conflict and a problem instead of a blessing. So after you've
02:05set that up, number one, family constitution, North Star, know where you're headed. You're going to
02:11engage with a tax professional. So if you've cashed out, it's likely that you've triggered a taxable
02:17event and you're going to figure out how to mitigate those taxes. We're coming out at the end of the
02:21year here in 2024. We're in November. You've got a couple of months left. You know, if you do have
02:25something this year, you're going to have to do something quick to be able to offset those capital
02:29gains, whether the short term or long term, depending on how long you've held the asset.
02:33So here's the deal. The tax man is going to come knock on your door. We're looking at some stuff here
02:39from Trump. Maybe he takes away capital gains on crypto that doesn't exist yet. Or, you know, maybe
02:45there's some other laws or regulations that come in around this stuff. Until those things happen,
02:49we have to operate under the pretense they're not. And the existing law and infrastructure is the way
02:53it's going to go. So irrespective, you're going to reach out to counsel for a tax advisor. We have
02:58many of those people at Digital Ascension Group, Digital Family Office. So love to help you there if
03:04that's something you're interested in. But anyway, you want to understand your liabilities. So what do I
03:09owe? Why do I owe it? How can we mitigate it? You're going to optimize those tax strategies. You're going to
03:14look at the tools to harvest losses or charitable contributions or depreciation or setting up
03:22insurance policies. A lot of different ways that you can, you know, skin that cat. But you're going
03:26to figure that out. You're going to set aside enough cash to be able to pay the tax bill. So
03:31you're not caught off guard. Okay. I see so many people that win the lottery or come into a bunch
03:36of money in crypto. You have famous cases where people evaded taxes and then were caught and had to
03:42pay millions of dollars because of the penalties and fees. And you don't want to be in that position.
03:47So trust me, it's not an area of do it yourself. You want to get a professional and you want to get help
03:53to avoid the future headaches. Number three, you're going to want to build a liquidity buffer. Okay. So
04:00again, you know, taxes aside, you're going to want some living expenses and you're going to want to have
04:05an emergency fund and some of those things. This is something we talk about just in general for most
04:10people as a good practice. You want to make sure that you have, you know, three to 12 months worth
04:15of expenses set aside somewhere, money market, earning interest, but easily accessible. It's
04:22liquid. Okay. And maybe that's a line of credit against your crypto. We'll talk about that later,
04:27but you want to make sure that you have access to those tools because you don't know what you're
04:32going to do yet. How are you going to invest the money to be able to generate cashflow? Did you quit
04:36your job? I know a lot of people right off the job, quit the job. I don't recommend that either.
04:42I recommend hanging out for a little while, structuring these things, getting situated,
04:46getting used to having that money and then making that transition. So if it's something that you're
04:52like immediately going to do, I'm not saying don't do it, that it's not possible that you shouldn't.
04:57Some circumstances demand that, but you know, just be calculated in the way that you're thinking
05:01about that. So you're going to think about this emergency fund as your financial safety net,
05:05whether it, whether the market goes up or takes a big downturn unexpectedly, uh, you don't have to
05:11worry about the volatility and you have that stuff set aside so that you can make sure your bills are
05:15paid and, um, you're taken care of and your family's taken care of. Up next, after you have that,
05:20you know, situated, you got your family compass within how you define your investment strategy.
05:26You might look at some diversification to invest in things that are uncorrelated digital assets,
05:31especially to hedge against the volatility here, right? Before, uh, constraints change,
05:35you know, we're, we're hopeful that we're going to get some regulation and utility and things are
05:39going to be more stable and developed. Uh, but as long as there's speculation in the space,
05:43we're going to have huge swings. And so having some, you know, investments outside the scope of
05:50crypto and non-correlated asset classes could be a really good idea. The way that I like to think
05:55about this is the same way that Kevin O'Leary does. Um, you should only have to get wealthy,
06:00wealthy once. Okay. You don't want to lose it all, betting it all again. You've, you've already
06:05done the hard work and making a good choice, making a good investment and seeing it appreciate.
06:10You don't want to squander it and watch it go back down. Okay. And we've seen a lot of people
06:14do that in crypto. So if you can pull some liquidity off the table, you might look at real
06:20estate. Uh, you can use cost seg on properties and pull that depreciation forward and offset some of
06:25the tax implications that you might have. Uh, you might want to look at stocks or bonds or ETFs,
06:31uh, some ways to get, you know, um, diversification and maybe across a wider swath of some of these
06:39things. Most of the family offices that I've interacted with and deal with, they're looking
06:43at, you know, somewhere between 15 and 25% exposure to equities, just public markets. And a lot of that
06:50is in ETFs. It's hard to pick winners in specific stocks. Um, but if you have, you know, you're
06:57investing in the S and P 500 over time, it's done 10% almost every single year, uh, over the long
07:03term, I I'm bullish on the U S economy. I think now that we have Trump in here and some other things
07:09are coming down the pike, uh, we might see a pullback in traditional stocks for a period of time, but I
07:14think the next decade, uh, and further out things are looking good. They're looking up. So past the
07:21short-term volatility over the longer time, time horizon, I do think we continue higher. Uh, you've
07:26also got bonds and treasuries and, and corporate debt, um, corporate credit. There's, there's a bunch
07:32of different areas that you can diversify into Kevin O'Leary. The way he thinks about this is he never
07:37puts more than 20% of his wealth in any one given asset class and never more than 5% of his wealth
07:43in one investment. And I think that's a great way or framework to look at it, to make sure that
07:49you're not betting too much on one horse, unless you really know, you know, diversification is a
07:55hedge against ignorance. Uh, I will say that, uh, if you understand the space and a lot of family
08:01offices do, they, they keep the core of how they built their wealth as the main focus and they may
08:06diversify within that ecosystem or whatever that investment thesis is. They might have a few
08:10ancillary things, but a lot of what they do is continue to double down on what they understand.
08:14So a lot of people here in crypto may end up continuing to do the same thing. And that's why
08:18we're going to go to number five, which is considering holding your crypto as a long-term
08:23wealth driver. We've seen so many people get wealthy with Bitcoin, right? They were confident
08:28in the beginning. They made investments at a dollar, $5, $10, $100, $300, $3,000. All of those people
08:36have done extremely well over the last decade here. And, you know, depending on what crypto you're
08:43in, um, my preference is XRP, but you know, we've got other ones. We've got HBAR, we've got XLM,
08:49we've got XDC, we've got ADA, like there's a ton of different assets out there that I think will
08:56have long-term utility and use case that will drive their price and adoption. And so if you're going to
09:00hang on to it, you can borrow against it or you can put it into other things. So you've got,
09:05like I said, the exponential growth, historical growth of some of these assets that have shown
09:09they're a great place to hold your wealth. You've got passive income opportunities with staking,
09:13if that's native to that network or protocol, uh, or the asset that you're holding. Um, some of the
09:18people that, again, I deal with XRP, uh, AMMs, liquidity pools, lending, and other DeFi that's
09:23being built out on that one network and other, there's some other strategies, uh, that you can use,
09:28you know, you have, you've got perps, you've got, um, if you're outside the U S and you have,
09:34uh, options place for, you know, covered calls and puts. And there's a lot of different investment
09:40strategies. If people are going to continue to hold the asset to be able to earn yield in the
09:43asset or in dollars, depending on what they want. And then you've got the fact that this is
09:48generational wealth, right? Like people that hold large amounts of gold or treasuries or other
09:53things, and they're passing that down to their kids and their grandkids. If it continues at the same
09:58rate of adoption and growth over time, that's huge. You're, you're handing them the golden goose
10:04that keeps laying the golden eggs, right? So I'm not always a proponent of selling off your crypto.
10:11I think that there are great strategies for doing that. I think diversification is key.
10:15Uh, if you are ignorant or this is your first time, you don't want to mess it up. Um,
10:20work with professionals in that category also. I'll just say that. Uh, but aside from those things,
10:27if we continue with the volatility here, you're going to have to have a strong stomach
10:31of people that have held Bitcoin for a long time. They're okay with, you know,
10:35a 70% pullback in the value of their asset. They continue to buy more in that period and it goes
10:40up again. Maybe they sell some off. It's a rollercoaster. Uh, but over the longterm,
10:46it's up into the right. You do you diversification good, holding the asset good, especially if you
10:52have a high understanding of what this asset is and what it's going to do. But the sixth thing
10:57that we're going to talk about is setting up a family office. So what is a family office? A family
11:01office is, uh, for people that are North of eight figures or range, um, in that area, you know,
11:09so a hundred million dollars or more most times for a single family office or a multifamily office,
11:14uh, a digital family office. And we work with people that are somewhere between 20 and 50
11:18million, right? So if you're North of that, you might be a single family office. Uh, you're going
11:23to have an investment strategy, tax planning, estate planning, lifestyle management, all of that,
11:28all those professionals are going to work for you and they're going to put your assets to work and
11:31make sure that you're earning a yield on them and be able to pay for all these things that you
11:36might want to deal with. The main thing that I would look at here, especially in the beginning
11:39is the state planning, uh, mitigating risk, uh, and protecting your wealth. And we'll talk about
11:44that for step number seven. So what does that look like? Do you want to get your assets into a
11:51trust? Do they need to be moved into an LLC? That's something we do for a lot of our clients
11:55proactively gives them a lot of flexibility with a tax code. And on the other side of a price
11:59appreciation allows them to easily move those assets into a trust. You, you want the LLC outside the
12:05trust so that you can harvest the taxes and pay that and basically funnel the assets into
12:12the trust over time through an interesting strategy we have there. Uh, you might look at an asset
12:18protection trust, a spendthrift, uh, trust, dynasty trust, offshore trust. There's all different types
12:24of trust that you might want to use, uh, in this instance, but again, it needs to go back to your
12:30compass, your constitution, what's your North star? How do you want to protect and structure your
12:34wealth to be in alignment with that? And so I would bring all that into the conversation with
12:39the tax planners, with the estate planning, with the investment strategy, and all of that's going to
12:45help you orchestrate the entities and how you've set things up within the scope of your family office
12:52to make sure that it's in alignment with that. And you're going to be successful over the long term
12:55with whatever your goals are. So on the digital assets in particular, okay, so you've made your money
13:01in Bitcoin, ETH, XRP, Solana, whatever it was, I would really advise getting that into institutional
13:09custody. I know a lot of people are notch keys, notch crypto. These are still your keys. You still
13:13have to sign on the transactions in institutional custody. If it's inside of a trust, you're going
13:18to have a distribution trustee that's going to sign off on that and the wealth manager, right? So it's
13:23multi-factor. It's very difficult to steal or, you know, impersonate all those people to be able to
13:28remove assets or do something with them that the individual does not want to do. Digital Wealth
13:34Partners partners with Anchorage for that service, multi-sig, and they have sharded keys across HSMs
13:42that store the assets and the keys, and it's extremely, extremely airtight for security. And
13:50because of that, it has insurance on it, crime insurance in particular, that covers the assets.
13:55And then you want to look at other types of insurance. Do you want to set up and safeguard
14:00your assets inside of an insurance policy? Here in the U.S., you can have financial products and
14:06insurance policies can mix together. You have a unique product called PPLI, or Private Placement
14:11Life Insurance. It's something that we do for clients for anything above the gift tax threshold that
14:16they don't want to move into a trust or pay the taxes on for doing so. And so you want to look at
14:23that. We have a lot of providers we work with specific to crypto for insurance, do species. If
14:27you want to add more insurance onto your accounts, we can do that as well. So all those things, you're
14:34mitigating risk, you're setting up your estate, you're putting things in place to be able to offset
14:37taxes and make sure things are structured in a way that people can't get them or take them from you
14:42in a lawsuit. And then the last thing for step seven here in protecting your wealth and mitigating
14:48risk, you're going to do continuous reviews of all these things. Is what I'm using the absolute best
14:54in the industry for whatever area, the insurance or the custody or each one of these advisors,
15:02right? You're going to assessment on annual basis and make sure that everything's on the up and up
15:06and everybody's got your best interest at heart. We welcome that, right? We want to make sure that
15:11we're providing the most value that we can for our clients. And so with that, you just want to make
15:16sure that you're doing those regular reviews, checking your investments, making sure that
15:20they're keeping up with what you anticipated and they're in the areas that you thought they were
15:24going to be. And again, you can put governance in and all that stuff to make sure that that's the
15:28case. But this is kind of the order of things that you want to think through. And then aside from
15:34that, like I talked about early on, you may have lifestyle, you might have legacy, and you might
15:39have philanthropic interest, or you can have all three. I'm not saying you have to pick any one. It could be a
15:43blend of all three, whatever it is. A lot of people may have some philanthropic interest.
15:47And if you do, you might set up a donor advised fund or a private foundation or charitable remainder
15:53trust. There's a lot of different products that you can structure and use to really, really make an
16:00impact for people. And we have people that can help do all of those things, set them up. And it's a
16:08nice tax write-off too, and you get to help people. And I think as your cup flows over and you have
16:15more than you need, it's nice to be able to give back to other people and help others from how you've
16:21been blessed. So on the other side of philanthropy and what that may look like, again, lifestyle legacy
16:29planning is kind of the next stop here. Once you have your estate established for yourself, am I going
16:35to set up insurance policies for my kids' kids or my grandkids? Are we going to use a generational skipping
16:40trust? Are we going to set up wills? Is there, what's the governance structure for our family look
16:48like, right? In that, you know, are there stipulations on who has access to the money, when, and if they
16:54have to do certain things to get access to the money? What are you going to pay for? Education, homes, cars,
16:59you're going to supplement income. Uh, like I said, insurance policies earlier on, there's a lot that
17:05goes into that. And like I said, it's a little bit further down the line, but once you have things
17:11established, you've got it set up, you're making money and, and you're thinking about kids, kids,
17:17kids, kids. If you really do, you know, Kevin O'Leary has life insurance policies set up for the next
17:21five generations, just to go back to Kevin. He's done really well, right? So if you do really well,
17:26then it might be something, it's definitely something you're going to want to consider.
17:30And then the last thing, number 10 here, you want to make sure that you're staying educated.
17:36You're staying up on the space. You're understanding how things are moving forward. Um, you're again,
17:41you want to have a good enough understanding about all of these things so that you can have a
17:46conversation with professionals and nobody's pulling wool over your eyes. I've seen a lot of
17:50people over the years work with people and get real comfortable and just assume everything's going,
17:56going along and it's not. So, um, not to say don't trust people, just, you know, trust, but verify,
18:03right? That's the whole point of blockchain and crypto. Uh, but you want to stay educated. So as
18:09things come about, DeFi protocols come up, uh, new things happen on networks, different types of
18:14strategies, different types of trust and estate planning, uh, laws change, all these things can
18:20affect, uh, you and your money and your estate and your family. So you want to make sure that
18:26you're staying up on that, especially, you know, if you don't have to work that day job
18:29anymore, you got a lot of time on your hands, go, uh, sip some Mai Tais on the beach and read some
18:33books. So some of the ways that you can do that again, uh, just continue education through courses,
18:38books, events, going, and you can write those things off if they're part of your business.
18:42I'm just saying, uh, keep an eye out on market trends and regulation changes, uh, and then adapt
18:47your strategy to emerging new opportunities. A lot of people that are invested in this asset class
18:51may be looking at AI. You might be looking at, um, some of the other convergence of different
18:57technologies that create solutions in different industries. You've got 3d printing. There's,
19:02there's so many things that I think are going to happen over the next decade here with the advent of
19:07AI and the acceleration of a lot of innovation in multiple spaces. Um, it's going to be interesting
19:13and hard to keep up. So the educational piece is huge for this. And especially if you're going to
19:18be actively managing your investments, which, you know, a lot of patriarchs or matriarchs are people
19:23that make their money do, uh, inside of a family office, then you definitely want to be stay sharp
19:27and be able to do those things. So if you're doing that, you're going to be able to stay informed,
19:32you're going to make better decisions. So there you have it. There's the 10 things that you need to
19:37do, uh, if you do have a liquidity event in crypto, you want to set up that family charter or compass.
19:43You want to talk with a tax professional. You want to set up that liquidity buffer. You want to look
19:48at diversification. You want to potentially hold your crypto for the long-term driver of your wealth.
19:53You want to set up a family office. You want to look to protect your wealth and mitigate risk.
19:58You want to set up, uh, potentially set up philanthropic interest, legacy planning, and then the last
20:03things to stay educated. So whether you're cashing out, holding long-term, building a family legacy,
20:09or you have philanthropic interest, the key is to act with intent and strategy. So if you found this
20:16video helpful, again, as always, please like, subscribe, hit the notification bell, and let me know in the
20:20comments, which of these steps are you focused on? And until next time, stay curious and stay ahead of the curve.
20:33Bye.