395: Bullet Proof Asset Protection - Level 3 Strategies

You want to have money in retirement accounts. This is level three asset protection. This is the final episode.

You may think you're above it. You wanted to go straight to the advance level 3.

There's $35 trillion in retirement accounts in

the U.S. think how do I protect my IRA or my 401k from this deal? Welcome, everybody, to this week's episode of the Main Street Business podcast with yours truly, Mark Kohler and the amazing Matt Sorenson.

That's your cue, baby.

This is this.

That's my cue. This is level three asset protection. This is the final episode the Asset Protection series. We're going to get into it fast here today. Go through the last items. We think you need to know. This is advanced level three. All right, let's jump in. You want to hit. Let's go. Retirement accounts right out of the way. You know what I want to start with?

Yeah.

There's $35 trillion in retirement accounts in the U.S. we want to make sure you get to keep yours. Yeah.

And a lot of people think, how do I protect my IRA or my 401k from this deal? I need an LLC to protect my retirement account or need this? Well, there's a little known person in this realm of planning known as O.J. simpson. So, Matt, you want to tell us how retirement accounts are really asset protected so that people have the truth?

I think the first thing, just conceptually, if you didn't know about asset protection, retirement accounts, know this. That is one of the best places to have your money and your wealth built. If you're going to get sued, you want to have money in retirement accounts, there's a whole set of laws designed to prevent creditors from getting your retirement account. Even if you leave the scene with a bloody glove and you get a judgment against you from the Goldman family for $30 million.

That's right. Even if. Even if, hypothetically, you're on i5, like grand theft Auto in a white Bronco with helicopters around you. Yeah.

And you know, you know something, someone's chasing you down. Your retirement account's going to be okay.

Yeah. O.J. could have just been out the window. It's all right. My $3 million NFL retirement is just fine. And it was. It was. That's the crazy part. So, people, it sounds like a basic. But it. But it really is advanced in the sense that you. You want to be thinking about that wealth building going on and how your IRA is treated, how your 401k is treated. And so really, this is. Spoiler alert. There's nothing you need to do your IRA and 401k is protected. Now. Only two people can get it. Number one, the IRS. If you screw over the IRS, they're going to get into your retirement account. And I'll go number three. But number one is the IRS number. Number two is a spouse and a divorce. In almost every case, you're going to see a bifurcation of retirement accounts or at least they're going to be in the discussion in the settlement. You know, one spouse may get in while they give up something else, but they've got a spouse in a marriage without a prenup or a postnup is going to have a right to that retirement account. Some of you are like, well, was retirement before we got married? Well, it depends on what state you're in and what type of, you know, commingling took place. All sorts of things could happen. The third person that can get into your retirement account or entity is the US Government. In some sort of criminal case. You know, if you've been criminally prosecuted for fraud, whether it's the SEC or it could be ATF or I don't know, if you're running drugs or whatever you're doing, your retirement account is going to go away quick. So the feds can get your retirement account, the IRS and a spouse, you equally all three very dangerous. So make sure you're careful there.

Yeah. And the one distinction on retirement accounts, keep in mind 401ks or pension plans, they're called ERISA based plans. Those get a pretty much blanket protection. A creditor's not going to be able to get them. That's what OJ had. He had an NFL pension, they see a 401k, that's my pension plan. But even though he had like a $30 million judgment against him because he was found liable civilly, not guilty criminally, they couldn't attach that. IRAs are a little different in some states. IRAs are state specific, and you guessed it, some states, some of the states that are a little quirky where you might. Your IRA could be at risk. California. California says your IRA is protected from creditors up to the amount that it's necessary. The money in there is necessary to, for the use of the dependents. So if you have a $50 million of assets and you have a million dollar IRA and they're trying to get to that million dollar IRA for whatever reason, why would they go after your other assets? But let's just stick with me. That IRA could be at risk because it may not be necessary for you the person dependent on it in retirement, or maybe you have a spouse or other people dependent on that money that could be in the ira. So it's a little quirky in California and some other states, but generally IRAs are still protected. Very rare creditor is going to be able to get at your. Even at your ira.

Now, as we go to level three, Matt and I were trying to think of, are we just going to throw a modge podge of strategies. Which one's the most common, which one's the most affordable, which ones is more people need but don't use. And what we thought was. Let's go to our. What I think many of you are going to feel is your number one asset, and that's the equity in your home. How do you protect the equity in your home? Believe it or not, we're talking advanced strategies when we get to the equity in your home. Because there's only a few states and I've got them here, and my calendar got it here in my book. The tax and legal playbook. Both of these desktop references, so important. But the tax and legal playbook. There's a table in the back that points out some states say, you know what? That equity in a person's home is so important, we're never going to let anyone in a lawsuit touch it. If you're in one of those states, that's your first line of defense. You're going to be like, oh, sweet. Now, believe it or not, we go back to O.J. i mean, the guy was a genius. He had sold his home in California in this process and bought a home in Florida during the criminal lawsuit. And little Benson to the Florida state legislature, they were going to get brutalized with media going, how did you let this guy hide his home in Florida? And they're like, whoa, we didn't have a rule that you can't do this when you're. Anyway, so the point was Florida has some rules that if you're under a pending action now, it's going to be a little harder to hide your money in equity in a home. But for the most part, you have a home and. Let me read the states, Matt, Should I read them off real quick? Should we just throw it out?

Yeah. Got the. The homestead exemption is awesome. I was gonna say even Florida, which has this unlimited homestead exemption, you have a $10 million home and, you know, you gotta. You got all that equity in it. There's someone's got a judgment, they ain't able to get that. But also was, remember the MCI, WorldCom frauds, and then Enron.

Yeah.

All those executives, they also went to Florida, you know, and they bought these big old mansions. They knew they had lawsuits coming down the pipe from investors and people that lost money. So Florida's been a haven for some of those people. Yeah.

Now here's the.

Not just the cartels, you know, and money launderers.

Yeah. Here's the states, if you call it District Columbia, District of Columbia is unlimited. Florida, unlimited protection. Iowa, Kansas, there's some big states like Massachusetts has 500,000 protected. Nevada, 550. But anyway, the unlimited, continuing with that. Oklahoma is unlimited. South Dakota, unlimited. Texas, unlimited. If I said those read you those states there, those are states where your equity in your home is. Cannot be attacked in a lawsuit. Then it goes down to some states. Pennsylvania, no protection. Pittsburgh, if you're in Pittsburgh with a big home in the subs, no protection at all. Kentucky, $10,000. But it does include a house up on blocks and a Trans Am out front. So yeah, it does include a home,

whether it's working or non working.

Yes.

Still protected. Creditors cannot get it.

Arkansas, it does include a double wide, but not a single wide. So I want to throw that out. I'm making enemies everywhere. Seriously. Arkansas, homestead exemption is 2,500 bucks.

Yeah. So anyway, let me back up with your saying this is. This is where we talked about the member level one asset protection is not like the suit you buy off the rack. It's tailored to you. If you're in some of those first dates. Mark was just rattling off about unlimited. Stop right there. You're done. But also, maybe you're in Texas and you're like, I heard Texas unlimited. Well, what do you need to do in Texas? Don't you need to file a Homestead declaration or declaration of Homestead? Some states you have to claim this to get this on the. With the county or whatever. There's actually a filing for it. Most states you don't actually, which is nice. You don't have to do anything. It's just, is it really your home or not where you reside? So this is not a second home type thing. Just so you guys know, this is your principal residence where you reside. But that's why this is tailor made. And if you got a ton of equity in your home, look in, get Mark's book, for crying out loud. If you don't have it already. It's got the guide or obviously you can talk to one of the attorneys. We can help you kind of narrow this down too.

Yeah, I love it. And Matt's point, Iowa and Kansas is not automatic. You've got to file something. But Texas and Oklahoma are automatic. So again, you've got to know the rules in your state. And these rules can change on a dime. I put that as an asterisk at the end of my table in my book, because one legislative bill and the state rules change. So you always want to use mine as a starting point. Okay, now, before we get to the. I've got a whole chapter in my book on how to protect your home in a lawsuit. Number one, find out what your homestead exemption is. Number two, which is a cheap, affordable way to go, is tenancy by the entirety. Tenancy by the entirety. Now, what that means is this entirety concept is that if you're married, we're going to look at your home equity in a different way, because as an entirety, your tenants. That's kind of where that word came from, that it's not fair that if your spouse goes out and they're a criminal or stupid or getting a lawsuit and they're texting and driving and that husband or wife gets in a lawsuit, can the innocent spouse lose the equity in the home because of that spouse that made a poor decision? Well, in some states, they don't want that to happen. And so they have these jurisdictions. This is tenancy by the entirety. This table's a little. There's more states that provide some of this. It's called full bar protection jurisdiction. So that no matter what that other spouse does, your home's protected even after a divorce or the death.

Yeah.

So that. Oh, when that guy dies. Well, then we'll go after the wife's home. Nope, full bar. So this is interesting. Just some of the states that have this is Indiana, Hawaii, Pennsylvania. So you know where Pennsylvania says there's no unlimited exemption, but if you're married, no one can touch your home if one of the spouses gets in a lawsuit. So very. Anyway, there's about 13, 14 states provide that.

Yeah. You know, and tenancy by the entirety is a great one to do. Easy. It's just a way you get on the title on the deed. And here's the one that we don't love as much. Say you're. And this is where we get back to your individual situation. And this, we get this call quite a bit. Or this scenario, one of the spouses is high risk. They're plastic surgeon, a contractor, whatever. And they're like, man, if I get sued, I don't want them to get the equity in my home. Let me Put the home in my spouse's name, and then I'm not on title. All right. And because I've got all the risk. And so if they sue me, I'm not entitled to property. My spouse owns it, my husband or wife, who, whatever the case may be. And so we don't love that.

That.

That's not great. What happens if you sell that house? Do you get the sell of home exemption for both of you for 500,000? You're married, you weren't on title, your spouse was. I got all these issues with that. Let alone what happens when they die. Yeah.

Let alone divorce.

And yeah, we probably want it in a trust. That's your joint trust anyways. It's just.

Yeah.

So these other strategies, knowing your homestead exemption, tenancy by the entirety, are generally stuff we're going to gravitate to before putting it in the one of the spouse's name. Because you think they're less risk.

Yeah, I love it, Matt. And you know, I put this as common roadblocks to protecting home equity. And I like that Matt brought up the sale of home exemption because you might do a technique and then you go to sell the home and the IRS is like, whoa, whoa, whoa, you didn't qualify for the sale of home exemption. Now you're paying tax on the sale of your home, which you normally wouldn't because you didn' think to have a strategy session. And this is. Again, I'm sorry, this is not supposed to be an infomercial, but you may hate our firm, you just like our podcast, that's fine. But if you don't have a tax law firm that you can talk to once a year, twice a year on issues like this, one of the topics you want to bring up is protecting my home equity. What are we doing? How are we doing it? What are the. And one of the questions our attorneys are going to ask is, do you plan on selling the home soon? You know, do you have a revocable living trust? What state are you in? How much equity is in it? How many improvements do you have? You put in? All these factors play into it. The one that I think is interesting, and this is where we butt heads with Dave Ramsey, is Dave Ramsey is going to say, pay off your home. Now, from an economic standpoint, I still struggle with that. I mean, yes, you've got your home paid for, so from a financial security standpoint, you don't have a house payment, you're done. But let's say Your home's worth 250 grand, just a Modest. Generally, let's say that could probably be a fairly medium home price around the country. That 250 grand is not making you money. It's just sitting there, just duh. Number two, it is a huge target in a lawsuit in a variety of states. Now, if you're in Texas and Dave Ramsey saying, pay off your home, okay, no lawsuit's going to touch that home. But if I'm in Arkansas and I pay off my home, I might have a problem. So paying off your home is a really precarious conversation.

Yeah, a lot of factors in there. I love that there's an asset protection risk to it. But now, again, maybe you're W2 employee, you don't have a small business, you don't have rental properties, you don't have risks that can come at it. Or maybe you do, but you're like, all right, but I got the right entities planned. I've isolated where the risks are. I've got my LLC for my rental, so they're not gonna be able to come down to my home. You know, I've got the right insurance, I've got the right entity for my main business or side hustle to protect any liability that may be coming in there. So a lot of this protection planning can protect your home from them even getting down there. So it all comes together. It's all.

And I like how Matt mentioned insurance because we brought that up in level one because you may say, oh, I have an umbrella policy. I'm done. Go back and listen to level one. All right, now we talk about homestead exemption, tenancy by the entirety. Now we start to broach using the home as our jumping off point to some of these more advanced strategies. So you want to talk about.

Want to talk about equity stripping at all?

That was next. Number three. Oh, we just, you know, good minds, think a lot. Why don't you explain equity stripping? I love that.

Okay, all right. Now, this is not, you know, for 21 and older. This is for all audiences. This. This strategy.

Okay. Would you love to bring up the word stripping at any point in a conversation?

But, yeah, this is equity stripping. All right. Okay. And what we're talking about here is basically taking up the equity of your home and turning it into debt. The easiest would be a home equity line of credit on your house. Let's say you have a half a million dollar home, you have 100,000 left in an original mortgage balance on. You got 400,000 of equity. You could get a home equity line of credit for at least 300 grand, probably you know, that still leaves 20% of equity left, but you get $300,000 home equity line of credit. Now, the bank's going to put a lien on the property generally that says $300,000. They're going to lien it up to the maximum amount of the credit line that you have. Now, you may not even draw on that 300,000 line of credit, but you've got a lien on the property that makes it look like you've got another $300,000 of debt. Now, that makes you, that property, not look very appetizing to a creditor. If you get a judgment against you, they're not going to want to follow after your first mortgage and your second, and there's only 100,000 of equity left by the time commissions and everything happens, there's nothing any lawyer is going to want to chase down. So the home equity line of credit with the bank, I like that one because it's legit. We get a lien from a bank on the docs, looks nice and clean, very, you know, unattractive to a creditor that may be chasing you down.

And from there it gets complicated. What happens if you don't pull on the equity line? You say, I want the equity line. What's the cost? But I never drew on it. Now, if you're in discovery and a big lawsuit and someone you ran over, someone's kid texting and driving, the lawyer is going to want to know, did you draw on that equity line? And when did you. So let's see, you get in a car accident, you got the home equity line this week. Like, great idea, guys. You went, got your home equity line. Just think, in a vacuum here, the bank moved quickly.

Yeah.

Oh, sorry. That was humorous. Okay, so you get your home equity. Boy, that was a little hot flash there. Okay, so your home equity line gets done in a week, and you're on Mars. And then the week after that, heaven forbid, you get in a car accident, you're texting and driving, plow through a stop sign, boom, kill someone. The week after that. You now have a potential lawsuit and you're nervous. They didn't file the lawsuit yet, but you know, it could happen and it probably will. Even though you've called your insurance company and you've called on your umbrella, everybody's waiting, see what's going to happen. So you go out and go, ooh, I better draw on that equity line. So you draw on the equity line after the cause of action has occurred, not the lawsuit, but the cause that Created the action.

Yeah.

So now I think a lawyer, that's a good plaintiff lawyer is going to go bull crap. You know, that was a. What they call a fraudulent transfer. You moved the money after the cause of action in an effort to hide it. So now you're diving deep into a lawsuit to get to that point. No. But is the HELOC going to dissuade the average common litigator? Maybe. Smoke and mirrors, another strategy we see people do. I have clients that set up entities in Wyoming where the ownership is completely disguised. And the control. We'd use that as a privacy strategy. And that LLC of yours liens your home. There's no bank fees, there's no HELOC that really exists. But on paper, it looks like your home is mortgaged to the Hill. Smoke and mirrors. Would it survive discovery? Nope. Would it prevent your equity from going down in a lawsuit? Nope. But it might get some Yahoo that's thinking of suing you to think twice. And it was totally affordable and cheap to do that, my friends. Variations on equity stripping. Lots of options.

Yeah, Love it. You know, and there's no tipping involved or anything, you know, so. All right. Okay.

Number four.

Oh, you got another one still on the home?

Oh, yeah, I got five, six. Okay. No, number four. Now this is in my book. And for this, literally, this is just dedicated. Protecting your home in a lawsuit. Chapter 19, tax and legal playbook. Easy to read. Some good examples. Number four is the dapt, which opens the door to that conversation. Number four, do you want to explain this? Yeah, kick it off, Matt.

Yeah. The dap, this is the Domestic Asset Protection Trust. This is a pretty good trust, actually. We like this trust for clients in states that have a DAP statute.

I'll read them off here.

Dad's got one. All right, Utah's got one. What are the rest?

I'll read them off. Keep it explained while I pull it up.

Okay. All right. The dap, what it basically is, is it's a trust. Think of it like your trust for estate planning purposes. But we're going to put assets in it that have. We want to have asset protection for, for example, your home with a ton of equity. Now, these types of trusts are protected from creditors. Very different than your regular revocable living trust that we're going to do for estate planning. The daps are cool because they're protected from creditors. So if you get in a lawsuit situation. I remember we had a client once, a Nevada client, with a Nevada DAPT, $600,000 judgment against them. Their bank accounts at Wells Fargo were owned by their debt creditor, sent in a seizure to go get that cash. The bank was this close to releasing that money to the creditor and realized it was a domestic asset protection trust protected under Nevada law and was like, nope, you ain't getting it. Sorry. And that client was like, oh my gosh. Saved me, you know, and so exciting.

That was a neat day.

Yeah. So that was a good one. That was a good sign of like, all right, that worked. And so that's what the DAPT is. But you can use it for your home. You can put your home in it. Now, if you're in California and you got a house in California that your home and you're actually trying to protect, you're not able to do the Nevada dapt. That protection has been, I don't know how challenged it's been in the courts, but don't think of it for out of state assets.

Well, let me first, let me say that client, remember that client, that example you gave was in California.

Now it was bank of Nevada. No, no, no, no. They moved to Nevada. They were in Nevada.

Oh, he had already moved to Nevada. Okay.

Yeah.

Now, but here's what I want to say is kind of on that smoke and mirror strategy. If you're in California and you want to, you got a. The California 401k, which is $1 million of equity in your home, what do you do? There is no homestead exemption. There's no tenancy by the entirety. Putting it in an LLC is worthless. You get all the insurance you can. Throwing it in adapt is smoke and mirrors. We're not saying it's going to win at the end of the day, but it definitely is going to create hurdles and persuade settlement and things like that, which is what asset protection is about, is encouraging settlement and making more barriers and it difficult to get sued. So. But I like what Matt said, that depending on the type of asset and where you live, it's going to help us determine what, where to set up the DAPP. Ideally, you want the DAPT. You want to be in a state where DAPPs are recognized legitimate. The assets in that state, you sign it, you put it in there. Done. But. But that's not always going to be the case. The stars are not always going to align and so you can look at options. And I think that's okay. I think it. Yeah, it creates.

Yeah. And there's a lot of people use it in other states. I'm just, you know that where then you might have multiple assets in Multiple states, you know, even real property that's physically in another state. So there's just a little state issue there just in terms of when to use it. But the nice other thing about the DAPT is again, your regular revoke. Living trust is not asset protection. You have assets in that they can blow right through it. We're doing that for estate planning. The DAPT has this asset protection where a creditor just cannot get at those assets. You got a judgment against you that are not able to get into the assets in the dapt. Now, the nice thing about the DAPT is you do not have to do a trust tax return. It's. It's not, It's. There's some irrevocability to it, but it's not one where you have to file a trust tax return. Everything is allowed to flow down to your 1040 onto your personal tax return. So your tax reporting is actually pretty simplified too with adapt where some of the other trust structures that you might do. Super tax nightmares, increased tax rates, more tax reporting than you would generally want to do. So the daps a little streamlined and easy for tax reporting.

Yeah, I. Let me give you the states. We could do a whole show on daps. In fact, I think we have in the past. Here's the 18 states. Oh, my gosh. I'll read them quickly. Alaska, Delaware, Hawaii, Michigan, Mississippi, Missouri, Nevada, New Hampshire, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Virginia, West Virginia and Wyoming. Now, the states with the strongest DAPs are Nevada, South Dakota, Utah, Alaska and Delaware. And so you're going to. If you're going to choose a forum in a situation, you're going to want to go to one of those more stronger DAP stays. Anyway. Great strategy. And we really don't recommend it for anything other than maybe your home or some liquid assets, like some investment account. Yeah, investment account, bank account. You don't want to be putting your businesses in these DAPs. It's too cumbersome. Okay, now number five and six, we've already talked about in the. But in the book, I talked about putting it in your spouse's name, the home, which we said is very precarious. And then number six was umbrella insurance. So there's a variety of things you can do for your home. And after that point, I'm going to just say this, Matt, and throw it your way. You've done level one, you've done level two. You've got the right entities. You've isolated the risk in your rentals, your business. You've Got the right insurance. We talked about so many little nuances to good asset protection. Maintaining your entities. You've got your retirement accounts under control. You know where they're at, what state you're in, how they're protected. Then you went to did look at your home, you looked at your home equity. Do I have my revocable trust? How is my home equity exposed? How much is exposed? What am I doing to protect it? Then we go next level. Maybe there are some bigger assets and that need a little more love, a little more protection. What comes to mind for you?

Well, I did want to circle out on the trust stuff. Just because we brought up daps. I want to talk about some other trusts.

That's good.

Okay.

Some of these irrevocable trusts.

Yeah. So some clients get really sold on an irrevocable trust. And it's in the Bahamas or the Cook Islands or it's, you know, it's one of these jurisdictions where. Yeah, they're called self settled trust. They're one of these foreign offshore, let's just call it offshore trusts. Okay. It's on the Isle of Man or whatever. Okay. These offshore trusts that have kind of became asset protection havens, you know, they really have. People have gone there to put assets, to try and keep them away from creditors. And just a word of caution on those, that is not a standard strategy we recommend for clients. The average small business owner, real estate investor, should not be going down that path. Even if you got tens of millions of assets. I don't know that I would do that strategy. It could be very risky. And there becomes some major baggage. The number one area of baggage on an offshore trust, the IRS, they got 80,000 new agents enlisted. And when you have a offshore trust, you got to start doing offshore asset reporting. You got to start throwing that on your tax return. You want to talk about a big red flag for the irs offshore.

Yeah, yeah. I think it's a great point. And there are firms that are going to recommend some irrevocable trusts onshore. The, you know, Nevada tends to be these constitutional type trusts or commonwealth trusts or business trusts, and they'll call them all sorts of names to make them sound so sexy. And I have clients inevitably that come back and go, oh my gosh, the tax reporting, they were so much work. They charged me 20 grand. They charged me this, that and another. And get a second opinion before you go down one of these irrevocable trust rabbit holes. Now do they work? Absolutely. Not saying they don't, but they come with a Lot of strings. And you just want to understand what those are and be careful. I think people that listen to our podcast who have kind of figured out our lane. I want to be, I'll say it and be honest is that I don't. I'm not planning assets for 20, $30 million clients every day. That's not what I do. That's not my lane. There's trusts. I'm sure I've never even heard of that. The 50 million plus Uber uber rich people use and. But they can go to White and Case and those big law firms and get some specialized treatment. I'm there for the Main Street American. That's the name of our podcast. Main Street America. If you're really worth 20 million or more, we may even suggest you get a second opinion or consult with one of these expensive big law firms and buckle up, go in with your checkbook. That's all we're saying. Yeah.

But here's the one thing on these irrevocable trusts and offshore trusts, they're not doing it for the 50 million clients either. More of those trusts are owned by people to get sold them. And so unique scenarios where people do them. Just, just be careful. And I do love the comment on get a second opinion on it because most lawyers are going to be like, you don't need that. You're wasting your money. Let's do this instead. It's easier, it's cheaper, better solution for you. Doesn't wreck your tax reporting.

One thing that Matt, we kind of like we did a crypto asset protection webinar this past summer and we had some foreign asset protection folks come in and talk. Yep. And I thought they were quite reasonable. They made. They're expensive.

They don't oversell it. They're like, here's what it does. It's not like, you know, this miracle pill or something that's like kind of solve all your problems. Yeah. And I thought that was a fair way how they approached it.

Okay. Now, which means, okay, in our last six minutes, we're going to bring up probably now we've saved the. The grand finale for what I think is probably the most common next level asset protection. It's domestic and foreign. And it's called the cope, the Charging Order Protection Entity. And the COPE is where you've probably heard, I need to go to Wyoming or I need to go to Nevada or I need to go to Delaware to protect my asset. Now, the best way to explain a COPE is this. Let's go back to my example earlier in the show where, heaven forbid, you're texting and driving and really hurt someone, that liability occurred to you personally and they want to go after everything you own. And then let's compare that to you have a rental property and a tenant falls down the stairs and gets hurt. They're going to sue the LLC and get anything the LLC owns. But the LLC is there to protect you see that Your LLC protects you from the operations inside your business. But if when you get in that accident on the street, they're going to sue you and that's a liability outside of your business. So a lot of people. In summary, and I'm just going to get this general point out, then Matt, you can unpack it more here. I'm sure you more efficiently than me is that people say, oh, I set up an llc. My rentals protected. No, it's not. The LLC didn't protect the rental. The LLC protected you from the rental property. So what we mean, I got, I got in a car accident. My, my rentals protected. No, in a lot of states they can get into the LLC and take your rental. The LLC protected you from the rental, your home equity, your personal assets from the rental. It's not a two way street in every state. So. Notice how I pulled an accident street two way. You like that?

Yeah, I like that. That's good. That's good. Yeah. And staying in your lane and all that, you know,

furious.

Yeah, just a little Vin Diesel over there.

Throwing down or what's.

What was the guy, he died, what was the name? Paul.

Paul.

Paul Walker. He probably, you know, Paul Walker and

died in a car accident. Isn't life ironic?

He died in tariff.

He was driving a Porsche and wrapped it around a tree.

That sucks.

Isn't life ironic? It's just.

Dang it. Yeah, that's a buzzkill. Sorry guys. Bring that up. Okay. All right.

So cope.

So. So Cope. Let me just say what we like about it. We like that you can use a COPE entity in a state like Wyoming. That's generally the state we love for cope. And what we'll do is we'll have you own the cope. The COPE owns your property. Entities, the llc, let's say the LLC in Arizona that then owns the Arizona rentals or rental. So it's a, it's a middle company here. Sometimes we call it the holding company or charge order protection entity here in the middle that then owns a property. LLC that owns the property. Now I'm protected both ways. Something happens at the property level where they're stuck at that property Level llc, that Arizona LLC that owns the Arizona rental, the Arizona tenant that slept and felt they're stuck at the Arizona llc. So I'm protected from them coming down to me. But now I also get in the car accident on i10 in Phoenix and I get a judgment against me personally. Why don't want all that equity in my property at risk. They're going to have to, they're going have to go upstream. What do I own? I don't own an Arizona llc. I don't own an Arizona rental. I own a Wyoming LLC that owns an Arizona LLC that owns around. They got to work their way up. Now as they're coming up, they get stuck at this Wyoming LLC because Wyoming law says, hey, charging order protection. If some, if there's a single owner of this llc, a creditor stays outside of it, they can't get into the assets of it. Yeah, they're stuck.

I love it. Now let's explain the word some. One thing, I'm embarrassed here. We just, I just realized we've never explained what charging order functionally means. So let's say you're in that car accident through the crosswalk, texting and driving and they filed a lawsuit for a million dollars and you've got that structure Matt just talked about. You're in Arizona, you own a Wyoming LLC that owns your Arizona llc. So we've got this extra layer in there. You're willing to pay for it, it works for you. And we're not doing this for every client. We're going to amount of properties. You have the equity and all those goodies and you can actually get these copes going for a thousand bucks and maintain them for two to four hundred dollars a year. They're not terribly expensive. I think umbrella insurance could even be more. But anyway, you get in that lawsuit and they get a judgment against you, they actually win the lawsuit. They found out you were texting and driving. Million dollar judgment. They're dying to get into that rental property. Well, the judge issues an order and he charges the parties with this. He says, I'm going to give you a charge with this order that you can have any money that comes out of that llc, but you can't get in it. You can't foreclose on the property, you can't lien the property, you can't force the sale of that property. But if Matt Sorensen decides to issue a dividend for lack of a better word or issue some income from the LLC in Wyoming, then you get to have it. So I'm Going to order, Matt. Here's my charge. Matt, if you issue any money, it's got to go to these people. Well, what's Matt going to do? Is he ever going to take out any money? No. And so the, the plaintiff is stuck. They're going to go, damn, I have a judgment and this charging order that's been given and I can't get that money. And so they say, I'll settle. And it forces settlement because they know they're going to sit around forever and wait and they don't want to. They want money now. Money now is better than money later. So that, that's how that charging order works. And Matt, you just alluded to it. We don't set this up for everybody.

Yeah, yeah, you're a brand new investor buying your first rental or two. We're not doing this. Okay, if you got $1 million or more in equity worth protecting amongst your rentals or other assets you want to use this cope for, let's talk about it. I'm not even sold that we're going to automatically do it. Let's talk about it. Let's see what risks you have. And then, you know, but the cost isn't significant. You know, this is not like these offshore trusts. That's 15,000 to set up and then, you know, 10 grand a year to maintain. It's much more affordable. It's a great solution to protect your assets from your personal liabilities. That's what the cope's all about.

I love it. Well everybody, hopefully you've been able to take away a little golden nugget here of something that might work for you and your plan. Thank you for participating in this three part series. You at the very least have hopefully been prompted to have an asset protection review with someone you trust. A lawyer, please. Wherever you may find that trusted lawyer, we're here for you@kqslawyers.com if you'd like to have that consult. All of our lawyers know this information backwards and forwards. It can be very affordable. Go through the three levels again. Listen to them with your partner, your spouse, your kids, whoever, and make sure you're on the same page on the level of protection you want to do. You may be shocked that we did not talk about privacy. That's a different topic. Hiding your assets is different than protecting them. We've done prior podcasts on that. We're planning to do another one soon. But thanks everybody. And Matt, any final words?

Yeah, thanks for being here. If you liked this three part episode, let us know. Subscribe to the podcast, give us thumbs up, five stars, all that stuff. And we'll be back, of course, next week trying to blow your brains with something awesome. That affect you, the Main street business owner.

See you next week.