Jim Dew Asset Protection: Why You MUST Have A Wealth Protection Plan NOW!

Has anyone in this room ever been sued or known? A friend or family member who was sued? Okay. Probably about, I don't know, 10 of you raised your hand. Okay. This is very important subject and that's why I've asked Jim do to talk about it. As some of you know, Jim has been my financial Advisor for over 20 years. I think so much of him and his wisdom that he has the power of attorney, like I mentioned earlier on me. So if anything should happen to me, Jim makes my financial decisions, which, as I think about this anyway, Jim also has more certification designations after his name than Alex. And I can't even pronounce the name. Yatrabooski has letters in his name. Jim is a cfp, chfc, cpwa, cdfa, and he has an mba. What all of those certifications mean is that Jim is highly qualified to advise wealthy entrepreneurs to help them manage their wealth. What Jim is going to talk about today is a checklist for you on five key areas you need to know to protect your money. So Jim's title is don't let the big bad wolf take all of your wealth. Please welcome Jim Do. Thank you.

Thank you. My dad was born in 1925. He grew up in the Great Depression where his father, my grandfather, was out of work for seven years, lost two homes and had trouble putting food on the table. Then the day that we'll live in infamy, Pearl harbor changed the course of my dad's life. He ended up enlisting in the army at age 17 and he ended up in a war zone, combat zone in the South Pacific. So my dad was always worried about the next Great Depression, about the economy crashing. But it was another kind of crash that almost ruined him. My dad went to get his hair cut a couple years ago, and when he went to park his car, he hit the gas instead of the brake and he crashed into a shop. And shortly thereafter, the big bad wolf showed up. This is an actual picture of the attorney who sued my dad. I'm going to get back to my dad's story later, but I want you to remember something Ralph Waldo Emerson said. He said, it requires a great deal of boldness and a great deal of caution to make a great fortune. And when you have it, it requires 10 times as much skill to keep it. Do me a favor, don't take any notes today. I'm going to have a handout at the end. It's going to cover everything I'm going to say. I'm talking today about wealth protection, or sometimes called asset protection. Protection from what? From lawsuits, claims, creditors, divorce, business dealings, accidents. And what is wealth protection? It's simply having a plan so your assets can't be taken. That's the golden thread today, having a plan so your assets can't be taken. I'm going to cover five areas of wealth protection. You have a scorecard in front of you so you can score yourself as we go. First, entities. All of you have businesses. You know about things like llc, C Corps and S Corps, but are you using them in a coordinated fashion to get the best protection? So most of the risk in a business is in the operations and yet the business owns assets. So an easy idea, something you could do. One entity could own the operations. You could have another entity own the assets. Now you have some protection. Another great tool is the family limited partnership or the flp. This works really well for estate planning to transfer to future generations, but it also provides excellent wealth protection. It follows the old adage, control everything but own nothing. So now score yourself one to ten. One being you haven't really thought about entities and how to use them for wealth protection. 10 being you've got a really solid plan and you've worked that really well with your team. Liability insurance. I'm going to start with umbrella liability. And I'm not talking about this kind of umbrella. I actually got that slide from Tucker Mac, so it's not my fault. I'm talking about the kind of umbrella in your homeowners and auto insurance. And you might say, what is it? Well, it's liability coverage over and above your normal liability coverage. What does it cover? It covers anything you own title to and your family. And it doesn't just cover accidents. If you got sued for libel or slander, it would cover that too. Your defense. So how much do you need? It comes in million dollar increments from 1 to 10. A simple rule of thumb, take your net worth and go to the next million. So if you have a 1.3 million dollar net worth, 2 million dollar umbrella. Anything else? Yes, read your exclusions page. Most people don't do this. And one of many things you don't want to see there is punitive or exemplary damages. There we go. What are these? Let me give you an example. Let's say you go out one night drinking. And I'm not talking about the kind of drinking where you think you're Batman and you do really stupid things. I'm talking about the kind of drinking where you just have a glass of wine and you go out and get in your car. You have an accident, someone gets hurt, they sue you. And in the judgment they add punitive or exemplary damages on top of everything else. Why? Because they're making an example out of you. Even though you weren't drunk, you shouldn't have had a glass of wine and been drinking. This can be hundreds of thousands, even million dollars of the judgment. You might say, I don't drink. Well, even if you don't drink, if you have a phone in your car and you're using it while you're driving, the other side's going to want punitive and exemplary damages on top of everything else. This is a policy I reviewed recently. It happens to be GEICO on their exclusions page. They expressly exclude punitive and exemplary damages. You don't want that. There's also a huge mistake that I see parents make. This happened in Arizona in the last two years. Parents daughter graduated high school, she was over 18, away at college, didn't have a car. So they thought, well, we're going to go ahead and cut the insurance cost and take her off the policies. One night she went to a party with her boyfriend. He did some drinking. She didn't drink. But the kind of drinking he did was not the kind of drinking that makes you mildly interesting. It was the kind of drinking where you get hammered. That's Jason Fladley. And now that I know that. So she was a good kid. So you know what she did? She took the car keys, she drove him home in his car. Unfortunately, in the dark, she didn't see the pedestrian. And guess who showed up? The big bad wolf. And when the attorney found out the daughter had no money, the attorney went after the parents and won a multi million dollar lawsuit against the parents. Why? She was over 18, not living at home. That's not the test. The test is, was she financially independent? And the parents were actually claiming her as a dependent on their tax return. Which was great evidence for the other side, financially ruined the family. If you sit on the board of a bank or a charity, make sure you know the director's insurance that covers you and what's in that policy. So score yourself on liability insurance. One being low, 10 being high. IRS plans. I'm not talking about the plan the IRS has for you. I'm talking about plans that fall under the IRS code, like qualified plans, 401 s, defined benefit plans. They're protected by federal law. IRAs are state specific. So in Arizona, there's good protection. In your state, there may or may not be. Know what your state says? Ask me if you're not sure, another great tool in your business to transfer risk is something called the captive insurance company. This allows you to transfer risks like reputation risk, loss of a key person, cyber attacks, regulatory action, loss of a key supplier, or loss of a key customer. There's also great tax advantages. Last year the premium was limited to 1.2 million. This year you can put 2.2 million in a captive. So that would save you about a million dollars in taxes. And on the back end, when you sell your company or you end the plan, you can turn it into capital gains. Tremendous tax vehicle. You should know about that. And for more protection, you can have that owned by an LLC. So score yourself on IRS plans 1 to 10. Life insurance and annuities. So there's traditional life insurance and annuities. And remember, these products have pros and cons, but if they fit you for other reasons, they can give you protection. This is also under state law. So Arizona, once the money's been in there for two years, you get protection. Know your state law. If you have higher net worth, you can get those same protections using something called private placement life insurance or ppli. Tony Robbins in his book Master the Money Game, he talks about this concept. So let's review the benefits of life insurance. We know there's the death benefit, there's tax free growth, there's tax free distributions. But we know there's drawbacks to life insurance like high surrender charges, huge commissions, high cost, lack of transparency, and you have to use the company's investments. So with ppli, you get all the benefits without the drawbacks. So you get the death benefit, the tax free growth, the tax free distributions, but also no surrender charges, no commissions, low cost, complete transparency, and you choose the investments. What's the catch? Sounds pretty great. The catch is you have to have a lot of money. You wouldn't look at this until you had about 15 to 20 million or more of liquid net worth. So if you're there, look at it. If not, put that on the radar for the future and score yourself 1 to 10 on life insurance and annuities trusts. So all of you probably have something called a revocable living trust or a family trust. And you should, I hate to break you the bad news, but that doesn't give you any protection unless you die. But there are trusts that do give you protection. So one is the self settling Asset protection trust. It used to be if you put money into a trust and you were the trustee, no protection. But then states like Nevada, South Dakota, Delaware and Alaska passed laws so that you can be protected. So in Nevada, you could put money in a Nevada trust. You'd be the trustee. You'd have to have a co trustee. That's in Nevada, but you get to hand pick that trustee who's friendly to you, and now you have protection. Another great thing to use is something called the Offshore Asset Protection Trust. Do not use this to avoid taxes. The IRS is getting really tough on that. But it's a great vehicle for protection. And then the Spousal Lifetime Access Trust, the slat that's become popular in the last couple years. This year, the exemption, you can give away 5,490,000. So you give that to your spouse, Your spouse gives 5,490,000 to you. Make sure the trusts aren't identical so that you don't have a reciprocal trust problem. And now you have $11 million protected. So score yourself 1 to 10 on trusts, and then please total your score. If you're in the 40 to 50 range like I have, Joe, give yourself a gold star. If you're less than 20. I'm concerned about you. You're at great risk. So what should you do? Meet with your team. And if you don't have a team, start with a good wealth advisor and then review or create your plan. Because the key is having a plan so your assets can't be taken. My dad had and has a good wealth advisor who cares about him. And when that big bad wolf, when that attorney found out how my dad was set up, he didn't look like this anymore to us. He looked more like this. My dad's 91, doing great, and he didn't lose a penny to the lawsu.