Protecting Your Wealth: The Legal Armor You Need with Scott Smith - Episode 537

Like, the money is really just the gas that I need to put into the car, but what I'm doing with my life is I'm going on a road trip. And the point of life is not to accumulate as much gas as you can. It's really just to make sure that I always have gas and I have enough gas to be able to go on the road trip.

The Investor's Legal Armor and Why Your Portfolio Is Only as Strong as Its Weakest Link. The one mistake 90% of real estate investors make and how to fix it before it is too late is what we're going to look at today. You spent years building your portfolio, but without the appropriate protections, a single lawsuit can wipe it out overnight. So today's episode is all about the missing piece in most wealth-building plans, your protection. So welcome, all you enlightened investors, to Streams to Impact. I'm your host, Dr. Allen, a psychology professor, impact investor, and founder of Steedtaker Capital. At Steedtaker Capital, we empower high-income professionals to build secure, high-yield passive income streams through tax-advantaged and recession-resistant private placements. It's about turning your hard-earned income into lasting legacy with meaningful impact. Our podcast, Streams to Impact, brings together top investors, educators, and strategists to help you grow and preserve your wealth that's stable, scalable, and aligned with your long-term vision. So just a brief disclaimer, all information shared on the podcast is for educational purposes only. It is not to be construed as investment, financial, legal, or tax advice. All investments incur risk. You should not invest if you are not prepared to lose 100% of your investment, and you are always encouraged to consult your legal, accounting, and tax advisors before making an investment. So what do you get when you cross a hardball litigator with a real estate investor? Who's made millions? You get today's guest, and he sued insurance giants and up to the appellate court level built a team protecting two billion in assets across all fifty states, and he spends over ten million perfecting the system to shield wealth from lawsuits, taxes, and bad deals. His firm, Royal Legal Solutions, is the secret weapon for investors who understand true wealth isn't just what. What you earn, it's what you keep. So welcome, Scott Smith. So welcome. We're so glad to have you, Scott. So if you will just tell us, uh, you've seen firsthand how lawsuits can dismantle wealth. What inner philosophy or life experience actually shaped your defense-first approach to investing?

Yeah, thanks for having me on, um, on your, uh, show here today, Dr. Allen. And my background is, um, it actually started when I was in law school. I bought a transmission auto repair shop and for the back taxes and rehabbed the business in the building, uh, to be able to flip it and pay for, pay for my law school. And as I was working as an attorney, I continued to invest in real estate, um, because that's where I just I had some success with, as you know, as makes sense, right? But, you know, even though I was an attorney, I wasn't doing all the things that I knew I should be doing. It's like that classic example, right? Of like, ah, you know, I probably should put this stuff in LLCs, but, you know, what are I doing? So I started to scale my real estate and I was having a lot of success with it and kept my expenses really low. So my cash flow, my real estate, let me go travel and let me go do, live the lifestyle that Robert Kiyosaki and the other people I was studying told me like, hey, this is what you want. You want the mailbox money, go live the life that you want to go live. And My big wake-up call was actually a friend of mine got sued for $3 million and he actually was very well insured. So the illusion that I had at the time that like, oh, if you just have like good insurance and umbrella policy, you're going to be fine. Don't worry about it. Got shattered. I was like, ah, okay. I need to go learn about what, how do you bulletproof things?

Right?

Because I was enjoying living how I wanted to live. And I was like, I got to make sure that this keeps going this way. Like going back was not something I wanted to do. I didn't want to have to hit the reset button and then start to like rebuild over again. So that's when I started to learn about like series LLCs and how to use different types of like land trusts that I could create anonymity around the ownership of the assets for further protection and for privacy, compartmentalizing everything that I own that way. In my worst case scenario, I probably would lose nothing. Probably the insurance company would take care of things. But even if the sky fell, I would only lose a part of what I had and not lose the whole thing. And that gave me a lot more peace of mind. But yeah, and then after I did that for myself, then you know how it works, right? After you figure out a really hard problem for yourself, then other people ask you to do it, help them with that. And that's kind of where Royal Legal Solutions started to kick off. is as I matured through what did I need to know for my own legal protection and my own taxes and my own investing, that that's what kind of got baked into like a company to help other people, um, with the hard-fought lessons that I had to do in my own journey.

That's a good way, uh, to get started is certainly to, to practice what you preach for sure. Well, you, you also did, uh, you, you worked as a litigator and you were actually involved in lawsuits against insurance companies up, up to the appellate court level. So tell us a little bit about those experiences and, and how that actually also helped to shape Royal Legal Solutions.

Yeah, insurance is one of those really interesting topics, right? Because I, I'm a big advocate for saying that you want to have good underlying policy. But what you really want to have is a strong umbrella policy. So like at least like a $1 to $3 million of coverage, which is actually the cheapest coverage. Most, you'll spend a ton of money to get like the first $50,000 in coverage. And then it's a few hundred dollars to just get, to get millions of dollars in coverage. So at a minimum, I think everybody should do that. But what I found out about with suing insurance companies is that insurance companies are a business that are founded on a principle of collecting premiums denying coverage. So that, that's their business model and they're not friends of yours, right? So they do a really good job of paying out low-dollar claims and they'll pay those out all day long, right? They got big negotiation departments and that's what they do. But when things really get spicy and you get a car accident that is, people get permanently disabled in, right? Or any type of really big money claim, Then what do insurance companies do? You see it on the news all the time, right? Hurricane comes in, hits an area. The insurance company says, "Oh yeah, we know you guys bought hurricane insurance, but we're actually just going to say we're not going to pay out all these claims." Oh, so what does that actually mean? Okay, now we have to go through like a litigation process, and you actually end up having to sue your own insurance company to get them to pay out on the claim.

Right?

The reason why you want an umbrella policy. in place is not because most of the time we think the insurance company is going to pay it, actually. We actually anticipate that they're going to deny coverage on a million-dollar claim. But you need the, uh, that kind of level of insurance policy to be able to take that to an attorney that's willing to work on commission, essentially.

Mm-hmm.

And we, they'll get a percentage. of the winnings of the lawsuit. And they'll turn around and they will take all of the expense on of suing the insurance company, which will cost somewhere between $50,000 to $150,000 in most cases in terms of costs there, right? So most people aren't sitting with that kind of cash. And so they pay for the insurance policies that way somebody else will cover all of the expenses, that other attorney, and then they can turn around and sue to be able to get the appropriate payments to happen. So that's a little bit inside baseball about like how the business really works.

Yeah, well, it's good insight to have there because we do have a lot of assumptions about insurance. Well, your work protects assets, but it also aligns with consciousness and consciousness in terms of capitalism. So how do you help your clients balance protection with really ethical standards that align with their values and their ethics.

Can you tell me a little bit more about what you mean by that? Because my general assumption is that what we're all trying to do as human beings is trying to answer one basic question, which is, what is the best possible life I can live? And how do we get to that answer, right? Tell— will then inform us of like, what are the things that we're going to do? And that's where like those big spiritual questions comes in, right? Look inside of yourself to be able to find out like, what is that for you, right? If you let Instagram answer that question for you or society answer that question for you, you end up doing a bunch of stuff, but it doesn't mean anything to you. And then you're constantly moving the goalposts to some other thing that you think will make you happy. And that ultimately never does, right? So for me, the question of what I want to be doing for my life is actually a separate question than what needs to happen with like my money. Like the money is really just the gas that I need to put into the car. But what I'm doing with my life is I'm going on a road trip. And the point of life is not to accumulate as much gas as you can. It's really just to make sure that I always have gas and I have enough gas to be able to go on the road trip. And the game of money is then how do I predictably create that? And so that's where we rely on and say, cool, well, don't own assets inside your personal name. Put it inside of LLC structures, protect with anonymity, make sure that it's tax efficient. So that way you're paying somewhere between, you know, 0 to 10% in tax. You're in investments that other people are managing for you with like the appropriate types of like syndications that way. I spend as little time, everything is leveraged as much as I possibly can from my team to handle those things for me. I spend as little time as I need to, to appropriately take care and make sure those things are being run right. And I spend the most amount of time I possibly can on actually living and doing what I care about, things that are going to make my life more enriching. I'm not exactly sure if I answered the question you were getting at or if you were getting at a different angle about maybe asset protection or something else, but you'll have to let me know.

That— no, that answers the question, at least, at least part of the question. You answered it in terms of your own life expectations and your own spirituality. How do you also bring that into the, the lives and the well-being of your clients?

Well, I think it's everything that I built and the company is actually all built for me, right? I didn't actually build this for anybody else. I mean, all of the teams, the system, the processes, all the work that I did with going and joining all of the investment groups to be able to learn about how to do appropriate syndication investing in real estate and oil and gas and other things like that, they were all just for me. So really, I think what it comes into is just to say, like, if you want to have the type of freedom that I experience, then this is the best system I've been able to come up with. And I think I probably spend maybe 4 hours a month, like, on money at this point to make sure that the— and that's basic. Most all of that time is actually just looking at where do I need to place money? How much money do I have coming in? How much needs to get placed? And then just pulling a trigger on that to do that. All the rest of my time is spent actually trying to tackle really hard questions for me, which is like, what do I really enjoy? Like one of the hardest things that I've ever run into in life is actually freedom from money. Everybody is so focused on like, how do you make money? There's another question about like, what do you do when the money is no longer the focus? But I'm only 40. I'm like, what is, what's, what is this going to be? You know? So, um, the, I turned to like travel and being outdoors, um, starting a retreat center, uh, here in Utah, uh, to bring, uh, bring people together. Um, working on like, how do I become like more of service of people that are in need? Like, especially like single mothers. I was raised, my dad passed away when I was 3. So I have a soft spot for kids and families where Especially with the single mother kind of community. And that brings me different levels of fulfillment. So it's, if you already know what those things are for you, right? And you just want the time freedom to be able to explore what those are, to deepen your spiritual practice or to live a different focus in life that's more inspired by what's true for you, then that's whatever that is, you're going to need time and you're going to need money. And that's all I really focused on, Royal Legal Solutions. I was like, great, I'll create the platform that will allow people to be able to create time and money. And then, then at that point, you know, if you want to say like, okay, well, Scott, what do you do next after that? Because I'm struggling with what to do next after that. And I say, cool. All right, come out here and let's hang out and let's sit together for a little bit. And I'll show you some of the other stuff that I've learned about how do you get to the second peak of life. Like what happens after time and money and what are the challenges that you're going to face there?

Well, Scott, let's just talk here about the basics in terms of Royall's Legal Solutions and what they do and what is the process that someone who is wanting to protect their interests, what do they need to go through to get started?

Yeah, so we take everybody through a simple quiz process, basically just to make sure that they're going to be inside of the demographic of people that we know that we can have success with. So we're a company that guarantees certain levels of success at the front end in terms of tax savings or performance. So it's important for us to be able to make sure that everybody is the right fit, right? So we can accurately predict what is the impacts that somebody should experience for themselves, similar to what we've seen happen for other clients we've worked with, right? And so those are going to mostly all revolve around like a financial impact, right? We want to be making every client money based upon like the tax savings and improvement in performance in their portfolio. So that's the best performing investment you can make. Every rich person I've ever met, they always talk about saving money on taxes is like the best performing investment you can make. It's the only guaranteed return on investment that you can make is saving money on taxes because you just know you're gonna have to pay the money otherwise. Then there's a bunch of boring stuff we're gonna do, like setting the foundation. Like if you build a house, the most boring thing you can do is pour a foundation. It's a big slab of concrete, right? And that's what all of your asset protection and your estate planning, you know, building out the systems and processes of what your meeting structures need to be to make sure things are going to be taken care of appropriately and meeting the team members. The really fun and interesting things I think is when you start working with the CPA team and the investment team. Because it's in the CPAs and investment pieces of it, after you get through all of the boring legal stuff, is where you start to be able to start to model out what is your future going to look like. And those are typically done like in a conversation that then turns into numbers inside of a spreadsheet that to say, cool, if we do these things, then these will be the net financial impacts for us. That if we're doing that correctly, should say, this is the story of how my life goes, which gets distilled into financial numbers, which then says, great. And now here's the action items that I need to do at this point. And so the action items at that are typically where you're going to be joining inside of like our investment community, inside of like our weekly meetings that are happening there and getting introduced to professionals like, like you, Dr. Allen, right? As you work with Some of the, some of our clients in there to be able to say, great, this is where you need to get upskilled inside of how your investing knowledge needs to work. So that way you can go live this dream life. And then everything should be managed on like a certain cadence, like a monthly or quarterly meeting with the appropriate team members. And that's how you're able to become time-free as well. To know that, cool, it's by a system and a process and a cadence that I know that everything is taken care of appropriately. So my mind doesn't continually obsess about like, am I doing everything that I should be doing? Which is the number one obsession that happens with everybody, even if they have a billion dollars.

Hmm.

They're always obsessed. Am I doing everything that I should be doing? It's the only way to, I've found, um, through a 3D reality, Contacts to get that question to stop or to minimize it as much as possible.

That sounds like a really involved process and a comprehensive process. So take us back to that foundation level and what is, what is entailed in that basic foundational level there?

Yeah, this legal foundation. So inside a legal foundation, there's a couple of things you got to do. You want to look at like, what are the current assets that I currently have, house, cars, brokerage accounts, whatever the case may be. Then you want to also look at it as like, where am I? How am I trying to grow? Where am I going to reinvest in the future? Am I buying single-family homes? Am I buying more syndications? Am I, what am I going to do? Right. Or am I just going to be in the stock market? And then from there, you've now like crafted like the story or the strategic vision. And from that, then you can say, great, now there's going to be an appropriate legal structure. If you're having a lot of individual physical assets, you're probably going to be wanting to like a series LLC or a Delaware statutory trust to protect all of those assets. You're always going to want to use anonymous entities and anonymous holding. So using trust structures are always going to be part of the ownership structure to mask the ownership of your LLC or mask the ownership of your investments in one way or another. And then what the— what your professional team What we do, and what I think every professional team should do, is to then create a visual diagram to show you this is actually what the structure looks like. Because most people gets lost in words, right? We need pictures to be able to say, hey, this is what this is going to look like. And so you're going to see that here's the structure of the LLCs, series LLCs, DSTs, land trusts, you know, private property trusts, whatever the case may be, right? That's going to be appropriate for where you're at now and where you're growing. There's another key component to this, right? Which is the estate plan, which is how are the assets going to pass? If you don't have an estate plan in place, everything goes to the court system, can get caught up in probate court. And then all the money that you think that you were going to pass to your family is now caught up in like a litigation or they can't get to it or whatever. You know, there's a lot of things that can happen that will kind of sabotage whatever is the plan for what you thought was going to happen with your assets. And that plan doesn't execute. So you're— what you need to have in place there is 2 documents, a living trust and a pour-over will. And both of those should be reflected inside of your diagram so that your living trust is at the very, very top. It controls all of the assets through all of the entity structure. So all the entity structures, like a tree structure, will all tree into one living trust that's at the very top. And then you have a separate pour-over will that will say anything that we didn't put into this trust structure, like my jewelry or my clothing or whatever, right? And then didn't move that into an LLC. I didn't move that in there, right? It's just sitting out there in my closet. Well, all of that's going to go through the, through the pour-over will. And the pour-over will just typically says, I'm going to take everything and dump it into my living trust. And whatever my living trust says about how things are going to get divided, There you go. Now it's— that's how that's all going to get chopped up to whomever and whatever rules I wanted to create around how that's going to get divided. And that way I only have one document that I have that I look at each year to say, cool, is there any updates that I need to make to it? And that's just my living trust document because things change over time. Maybe my, my kid got married and I want to make sure that my grandchildren are provided for. Or maybe somebody had a challenge in life and they're suffering with some sort of addiction. And like, well, you don't want to give a bunch of money to somebody who's suffering with an addiction, right? You want to make sure, you want to have different rules for what do you want to do to protect. And so you just need to look at that once a year and that just kind of shores up your foundation. And ideally that's part of like a system and a process of how do you secure that. Should just be with like a 30-minute meeting once a year with your attorney.

Well, it's a very different wealth plan and process of protection than what most attorneys deal with. Even most attorneys who are providing protection are pretty much stopping at the LLC, or maybe some do go to the trust level, but yours is really a comprehensive package that I just don't think we see very often in the legal industry. It seems like something everybody should be doing. Well, Scott, most investors obsess over returns. How do you guide them to see asset protection as the foundation of true financial freedom? So I guess another way of asking that is really what kind of resistance and pushback do you see from people who want to protect their assets, And, uh, they come to you and they're going, well, I'm not sure that I want to go down this road.

Yeah. So what the way we look at it is that we're looking at, um, everybody wants to make as much money as they possibly can, right? Like, as like your gut check reaction, you're always— everybody's saying, well, what I want to do is make a bunch of money. So the first thing that we actually have to get clear on the fact is that is, is Are you really trying to make as much money as you possibly can? Are you actually trying to live the best life that you possibly can? Because those aren't necessarily the same thing. All right. So to live a great life, I think what you really want is stability. That living, having a fancier house won't actually make you happy. It will give you a short-term payoff. And then what you're going to run into is hedonic adaptation, which you'll adjust to it. And now you just have a bigger house that you paid more money for, but your overall happiness level hasn't increased. So if you're, if you're a student of happiness and enjoyment, then the game actually will change because what you'll actually start to understand is what I'm really looking for is stability and predictability, because most of the things that I'm really looking for, I don't actually need a ton more money to go experience, right? Sometimes that's too high of a level for people to access, right? So let me talk at a little bit more of a rooted level of this, right? So the more rooted level of this, the truth is, is that when people come in, what we do is we save them a bunch of money on taxes, and we cost justify everything we do with tax savings. With that, we are also going to go build all of the things that we know that they actually really need. Even though they're not the things that they really want. What they really wanted is the investment in the tax savings. So they say, great, we're going to make you a bunch of money so you can understand that your savings and investments in taxes is now cost justified by this. Additionally, we're going to go ahead and build all of the foundations and run all of those foundations with you because they're all of the right things to do to be able to give you that stability. But you might not actually be willing to pay for them, but we're going to do it for you anyway as part, because what we're really trying to do as a company It's trying to get people free. And whether that means that you know what freedom looks like or know what it takes, um, or you don't, or if that's what you really want, well, we're not going to compromise on what we know is actually the very best thing. So we're going to let you make a financial decision and we're going to help you make a life decision. It might be only years down the road that you're actually going to come back and say, oh, now I understand why you guys did it the way you did it.

Right.

And that's okay with us. Like, we don't mind, we don't mind operating that way.

Yeah, I can see that a lot of people would go, wow, this is really great, and then they get into the nitty-gritty of it. And well, it's not only just financial, but getting, you know, that foundation laid, there's a lot of complexity to that, and it just can be an off-putting process, I would think, for A lot of people.

I think, I think there's— what I find is that people are more so— the reactions that I get is that everybody's actually okay with— some people actually come in and like, I just want to do the tax and investing. We're like, hey, it's the same price whether you do— whether we build it. They're like, I'll handle the other stuff later. Okay, great. We're not going to force you to do something that you don't want to do, right? But what I find more often than not is that people really fundamentally understand that the proper asset protection, proper estate planning, proper care for their family, proper thinking about like, what's going to happen? How are all this stuff going to happen? If something happens to me, what's going to happen with the care of my family are all things that people know they need to tackle, but they just don't want to think about it because it's, you know.

Yeah.

Um, but once they're into a process and they see it's only going to take a couple hours of their time, to just have it sorted, then they're willing— then it turns into something like, okay, cool, I didn't know how easy it was really going to be to actually do things the right way. It's like, great, now this is where we feel like we're successful. We can help you do the right things and make it really time and cost efficient for you to do that.

Well, you've got the blueprint, and that makes all the difference in the world. Uh, doing all of this certainly on your own, or going from one attorney to help you set up your LLC, going to another attorney to set up your foundation, going to another attorney to set up your trusts. That is— that's complicated. So—

Not only is that complicated, I'll tell you, it's even worse than that because most of the people that come in will say, I've set up an estate plan. I set up an estate plan. It's like, great. Have you moved all of your assets and retitled them into the estate plan? No. Okay. When's the last time you ever looked at an estate plan? It's been 5 years. Okay, great. So what you did is you paid a bunch of money to set up a document. You didn't move the assets in and you haven't updated it with any of the changes in your life. So it's absolutely worthless.

Right.

And that it's even that fundamental.

Yeah.

More even to the thing that you're referencing, which is more like that would be somebody who's really on top of it. I got professionals and I'm frustrated with quarterbacking between all my different professionals. Yeah, that's definitely true. But the real level of execution that most people are at is actually so much lower than that. And that's where we really, that's why one of the more I got into it, the more I really into being of service in this way to people, the more I realized it's like, wow, we really need a holistic team with standardized meeting structures and standard meetings that we run people through to make it easy to make sure everything is built correctly, all integrated correctly and properly maintained. Because people just aren't doing it, even though they have a good idea and they're smart people and they're making a ton of money, just not doing it.

Yeah, it doesn't have anything to do with smartness, does it?

Yeah, it's a totally separate thing.

Totally separate thing. Yes, indeed. A lot of smart people do a lot of stupid things.

So, well, you need a lot of support, right?

Yeah.

I mean, that's what I feel like is like you find the very smartest people you can in life and then you find ways to be able to form relationships with them so they can support things that you aren't naturally focused on. You know, and I think that's, that's my secret to success anyway.

That is so true. The people we associate with are the people whom we actually become. Well, folks, thank you so much for being with us today. You can get in touch with Scott at royallegalsolutions.com. And as you have learned from today's session, They have a lot to offer, not only just in wealth protection but in planning for bringing joy and fulfillment into your lives, and doing that in a way where your wealth is protected while at the same time you're bringing more joy and fulfillment into your lives. So that's it. Royal Legal Solutions. So today, uh, Scott showed us why the richest investors don't just chase returns, they build moats around their wealth. So if you're ready to grow wealth, that's where you need to go. And also, don't forget that you can turn to Stetaker Capital. Where we are a one-stop service and we specialize in providing alternative investments that align profit with peace. And we do partner with Royal Legal Solutions to bring you these investments after you have done the hard work with the Royal Legal Solutions team. Thank you so much for being with us today. And if you've enjoyed today's session, please take a moment to like, share, and subscribe. And till next time, live abundantly, and we'll see you in the next episode.

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