Refresh Your Wealth Podcast - Asset Protection Strategies - What Really Works!

Broadcasting worldwide on Internet radio. Refreshing takes on legal strategies, straightforward answers to difficult tax questions, independent ideas on building wealth. It's the Refresh youh Wealth show with Mark Kohler and Matt Sorenson. Get your free copy of Mark and Matt's ebooks and sign up for their weekly free newsletter with important tax deadlines and articles@rejuvenyourwealth.com now here's Mark and Ma.

Welcome everyone to the Refresh youh Wealth podcast with Mark Kohler and Matt Sorenson. This is Matt Sorenson, excited for today's inaugural audio podcast, which you may be listening to, but also we're doing it on video.

Yeah, the inaugural part, guys. Yeah, the inaugural part is that it's video and audio posted to YouTube as well. We've been doing the audio podcast for close to 10 years with hundreds of awesome topics you can look at in Stitcher, itunes, whatever your podcast media may be. But this is it. We now we've got to focus. We have to be dressed. We have to be smiling and looking at the camera. This is.

Yeah. Shame.

More challenging.

You know, I didn't think out my outfit choice today, so leave some comments on YouTube if you hate on it. I get it. But this should be fun. And we. And then we know a lot of people use YouTube.

We've heard of it.

It's 2020 now, so I figured apparently it's a thing. Yeah, we'll give it a whirl. Throw some stuff up there.

Sponsored by Rockstar. Let me get the right angle for this.

Yeah, there you go. Does that mean.

Yeah, I'm smoothing my diet Mountain Dew

when I drink it. Yeah.

Is that a conflict? Are we gonna have to talk to our sponsors about that?

Yeah, we just have dual sponsorships. Matt Sorenson is sponsored by Diet Mountain Dew. The only diet with Dew in it.

I like it. Yeah, I gotta get down a Ricky Bobby type. We're sponsored by Rockstar. What do I do with this? You know? Anyway, well, thanks everybody. We are legit. I'm a tax lawyer, CPA and attorney specializing in small business and asset protection, estate planning. Tax planning. Just making you money. That's what I do. And my co host, Matt Sorensen. Yeah, Matt Sorensen. A tax lawyer himself, but specializing in pension retirement strategies. Self directing your retirement account. He's amazing. Both of us, several books out and trying to make the world a better place. So thanks for watching and. Or listening.

So, yeah, we're just two goods out. Two good dudes out there trying to live the American dream too. We have our own Businesses. Our law firm directed IRA. Our self directed IRA company directed IRA.com owning real estate. So we're advising clients, doing a lot of this ourselves. Hopefully you can appreciate that perspective. Now. Last week, if you listened to you heard us blow up a lot of the BS out there on this asset protection topic. And so today is part two where we're gonna get into the real strategies that actually work. Things. We see clients do things. You'll see other smart attorneys recommending and try and give you an idea of which is the right direction to go. Because we kind of blew up a lot of stuff last week.

Yeah, we were Debbie downers last week. We were telling you what didn't work.

Sorry to all the Debbies out there.

Yeah, sorry to all you Debbies. But now we're going to be. I don't know what you call Holly happies. You know, I don't know why they pick on the ladies for that. You know, Hank happies, David down something. Anyway, so we last week, yeah, we told you what didn't work. This week is what we feel does work in asset protection and some important perspectives on how to approach it and what's legit and how much you should be spending for this. So we're going to give some again, some words of caution now for those regular listeners out there. And I should say this, if you're catching this on YouTube for the first time and you're like, hey, I really don't want to look at these guys, but I like what they're saying. You want to catch that last week's show or go see it? You want to see those? Listen to those old shows. Just get over to itunes, stitcher, Spotify and type refresh your wealth and you'll see 3, 400 shows that you can start diving into deep dives. But what we do every week, except for our open forum week, which is next show where we field phone calls and take email questions from around the country, around the world. We do a tax and legal tip when we're not doing the open forum show. So tax and legal. Good stuff. And Matt, I had the tax tip. We didn't make a plan beforehand. Are you good with that?

Yeah, yeah, yeah. You got. I got the legal tip. So you go. You go first with the tax tip and I'll follow you with the legal tip. You know, you can be the opening act. I'll be the main event.

A tax tip you can actually understand and won't put you to sleep. A tax tip that could save you thousands. Hot off the presses in 2020. Now, now this is important. I want to talk about Social Security. Now, I know for some of you that are like, and we have a lot of younger listeners in their 20s going, why am I listening to a little, little blurb about Social Security? Let me tell you why, bud, because

can I tell you why? I'm in my. I mean, I'm 39.

You got a stump speech on this?

Okay, My mom's been asking me all these Social Security questions, and I'm like, oh, I'm giving her bad answers. So we're going to have a show on Social Security. We've had one in the past, but so this is important. You know, your family members, you know, they rely on a lot of us, a lot of us business owners to think, hey, you, you own a business or, you know, you're, you're out there self employed in the world, you should know everything. So, you know, don't think of yourself. Think about helping your family, your parents maybe, if they have these questions.

Well, and I think it really is a kind of doomsdayer conspiracy theory that Social Security is going to go away. Do you really think the government isn't going to fund Social Security or come up with something to support it, replace it, fix it, whatever. They're not, they can't leave millions upon millions of Americans. It would devastate the economy. There'd be chaos, there'd be anarchy. It's not going to happen. So it is going to be a mainstay of all of our retirement package, for lack of a better word. Now, let me just say before I tell you these numbers, this is important because I want you guys, gals to be. I say guys loosely. Listeners. I want you to be interested in this point. Even Warren Buffett gets Social Security and a steel worker in Pennsylvania. And Warren Buffett could very well be close to the same Social Security benefit. The median average of Social Security, now that's the media, meaning the average is around 2,500 bucks. Now, if you do it right and you do some strategies which I'll allude to here in a moment, you might get pushing over three grand. Sure. And some people that earn a little bit more during their life might get a few extra hundred bucks, but that's all it is. So we want to make sure you're getting this $2,500 a month, and adjusted for inflation, this could be 20 years from now. For some of you, it could be 20 months from now. But the point is, you want it. It's going to that $2,500 a month in Social Security that you've paid into all your life is important, but there's some tactics to it. It's just not. You just don't want to go with the flow and take automatically what you're given.

Just because you qualify for it on day one doesn't mean you might not go grab it.

Exactly. Yeah. And this is why we'll do a whole show. We've had Randy Lube Keon in the past as Social Security expert. He's great. We'll have him out soon. But I want to give this so in 2020, hot off the presses. The Social Security administration recently raised the earnings test for seniors who reach full retirement age in 2020. Now, the FRA, or full retirement age is a big deal. You can start taking Social Security at age 62, but should you. Full retirement age is age 66. So if you attain the full retirement age of 66 this year, you can earn up to 4, $48,000, 60 without forfeiting any Social Security retirement benefits. Now, what I just said might freak you out. You mean your Social Security might be limited if you make money? Yes. So if I. Here's an example. If I'm age 62, I rush down to the Social Security Administration office, I fill out my paperwork, and on day two, after I turn 62, I get my first Social Security check. Boom. And then I'm still got a job, maybe. I have a small business, you know, I'm out making money, earned income. If I earn this over this limit, $48,000 for every $2 I earn over 48,600 this year, it's reduced by a dollar. So if I earned $58,000, my Social Security benefits would go down by $5,000. And you're like, what the heck? I mean, I'm being penalized for working. Now it actually goes into a fund, and you'll get it back later in life. They're not going to take it away from you forever, but it goes into a bucket. They're not going to let you have it. Now they're saying, hey, if you want to go out and work, you go work. But we're going to hold back some of your money and give it to other people, and then when you get full retirement age, we'll give it to you back. And so you're like, what the heck? So what I want to suggest to all of you, and this is the general tip today, is. And then I'll shut up because we could get in. This is a Rabbit hole. Don't rush out at age 62 and start taking Social Security. If you can just wait four more years till you're age 66, you will permanently increase your benefit by 25%. That could be an extra $600 a month. If, say, median average is 2,500amonth and you wait four more years, you now get 3,100amonth for the rest of your Life. And that $600 adds up. And if you die, it increases your spouse's Social Security benefit. So waiting four years allows you to go out and earn money without your benefits being reduced, and it increases your benefits permanently. Now, that's just one strategy in this whole process. As small business owners, we want you paying into Social Security but not too much. I mean, there's just, again, it's a rabbit hole here. But I just wanted to mention again, for all of you that are close to to Social Security, don't rush out and take the money. You might have it. You may be forfeiting some of your Social Security benefits and you may be permanently reducing your benefits because you took it too early. So that's the tip. Matt, you want to add to that?

Love it. Love it. Now. Yeah, everybody's got to be strategic about when they claim it. If you don't need it early, don't take it early. Wait, it does add up. So you're not losing it. I think a lot of people think it's use it or lose it just because I can go claim it. If I don't, I'm going to lose it. No, it does back end back to you. So assuming you live, you know, if you die. But you're right, spousal benefit can get it if you had to have a spouse. So great tip, a lot of money there. We will do a show on Social Security later on. All right.

Don't avoid it, you youngsters. You want to pay into it, but not too much. There's a sweet spot there.

All right, let me go into the legal tip.

A legal tip that you can actually use. A legal tip where you don't feel like you have to take a shot.

Hour after this came up on my console this morning, big topic kind of relates to asset protection. Impeachment.

Impeachment, pandemic. No helicopter crashes.

Nothing but pro quo.

Yeah, I don't know what news you're listening to. It's either pandemic, impeachment or Kobe Bryant.

I said it came up in my consult this morning.

Oh, okay. Sorry. All right.

Something more practical. Yeah. Although we do need to talk about quid pro quo. Been hearing a lot about quid pro quo. There's some quid pro quo going on.

Okay, Is it like a type calamari pro quo?

Yeah, it's. It's a dish.

Dish served crispy as an appetizer.

You can get it crispy medium, medium rare. But anyways, okay, stay focused.

That's why you need a rock star diet. Dude's not doing it for you. This is what you need.

Yeah. Okay. Coming up on the console, client has a business that is headquartered in California, but does. But has services and clients in other states and was asking when do I need to register foreign into these other states? I'm a California entity. I got all my operations here, but we do ship out stuff and provide services in other states. Do I need to go register in all these other states where I have customers? Hmm, great question. Now, most states, and I've got a blog article on this, you can go to kqslawyers.com or sgrihandbook.com about when you need to register foreign. It's called a foreign registration. So if I've got a corporation in, let's say, California or an LLC and I start doing business in, let's say, Arizona or Missouri, when do I need to register? That home of the Chiefs. Go Chiefs. Or is that Kansas? Kansas City Chiefs crap. I don't know.

Yeah.

Where are they? What state?

Kansas City is part Kansas, part Missouri, but I don't know which side Kansas City Chiefs are on.

Well, yeah, I think they both claim it.

I'm so embarrassed. It's super bowl week. We should know this.

I know, Sidetracked.

All focused on is my, my little, you know, great grape jelly meatballs and little wieners and the bagels. I, you know, bagel, pizza, food. I'm planning the menu right now. Okay, sorry. You got me off track. Okay, so, okay, clients got stuff going on.

California business got stuff going on in Missouri. Customers there, no employees, no location or anything, doesn't own any real property there. So generally speaking, you do not need to register your entity foreign just because you have customers in Missouri. Now, if you start putting employees out there, put a place of business, start putting inventory or equipment out there, you're going to need to start registering foreign into Missouri. Now, the same thing goes, if we're just talking about rental properties in your llc, let's say I have an Arizona LLC that owns rental properties. Let's say the next one I buy is in Indiana. Now, I can either set up a new LLC in Indiana for that Indiana property. Or I can take my existing Arizona LLC and register it foreign into Indiana. But if I don't register, if I just have my regular Arizona LLC and I go put it on title on my Indiana property, Indiana doesn't give a crap. They're like, you didn't register it here. We're not recognizing that entity here. You need to pay our fee and register that Arizona entity foreign into Indiana. It's called foreign registry.

Yeah.

You're personally personal and other state states have fees and fines for this as well. That's where the blog article has a lot of detail. I gave some sample of different. Different states do. Every state's a little different. But. But check that out and just keep in mind when do you need to register foreign when you have assets, employees, or like equipment, inventory, things like that in the other state where you're doing business.

Okay. And I want to add a little term that I think is important to use when people call up and go, do I need to register in that state? I'll say, are you doing business in that state? And I always do the quotations doing business in that state. And they go, well, I have customers there that's not doing business there. So I like that. Matt gave some of the criteria of what doing business means, and that's usually having a location, paying rent, paying employees, having equipment, da, da, da, da. But that's the point. And there are books and court cases and thousands of lawyers and accountants that work in this area every day. Because by meeting the definition of doing business in that state, you are now subject to taxes in that state. And in honor of Kobe Bryant, who I use this example all the time. And what a tragic situation. And I love the hashtag that's going on out there. Daughter, dad or dad daughter. What is it? Daddy? Yeah, it's a great little hashtag about dads and daughters and people taking pictures with their daughters and just such a sad situation. But I would, I would use Kobe Bryant as an example all the time. So I'll do it in little homage to him is when Kobe would play for the Lakers. What happens if they went and played a game in Denver and played the Denver Nuggets? Well, he went and did business in Denver. He went and played a game there.

So now the worst team name ever, the Nuggets. The worst team name ever.

Fair enough. Fair enough. So. So Colorado now gets to tax Kobe Bryant's income proportionally for the amount of money he made in Colorado. So this is where state tax gets berserk because now we've got to take Kobe's annual salary in the NBA, plus endorsements, sponsorships, all the other revenue he might make based on his Persona as a basketball player, and then allocate it amongst all the states he played a game in, divide it by this numerator denominator and find out how much income is allocated to Colorado. Because he went and played two games there, and that could be a big deal. I mean, that could be tens of thousands or hundred thousands of dollars to the state of Colorado per basketball player in just that one game in tax revenue. Right. So that's. Now, does he need to register to do business in Denver? All right, mean in Colorado.

That's a different question. That's a different question than whether you owe state income tax in there for.

That's right.

Yeah.

So because he was under the umbrella of the NBA as an employee and not a subcontractor, he's not going to have to register, in my opinion, his professional corporation. Most athletes have a professional corporation that the sponsors pay. So anyway, it gets. You can see again, another rabbit hole conversation. But the point is, people, if you're doing business as it's been loosely defined here by the amazing Matt Sorenson in other states, get a consult with your attorney and find out, man, should I register there? Because if you don't, you can be personally liable for anything that goes wrong there. The end. Bam.

Okay.

You nailed it, Mr. Sorensen.

I love it. Yeah. And doing business has nothing to do with what happens in the bathroom. That's something different.

Yeah. And that was so good. I'm going to give it a pen drop

because these microphones are, you know, way too nice to be dropping.

Show's over. Okay, so let's get into this asset protection topic and we've got a lot of listeners, followers and we appreciate that and we don't take you for granted that really want the truth on this and hence why we both written about it a lot.

Yeah.

Matt, why don't you give the three. You were going to do this, you were going to break down the three main perspectives, if you may. And then I had kind of an overreaching comment too. And then we're going to get into real tactics that do work. So this is, this is notetaking type podcast. We're not going to just fluff it up here. Okay. What are those three perspectives? I like them.

Okay. Yeah, I think everybody gets lost in like what type of entity do I do? Do I set up something here or this state or this kind and and you get mixed up in it if you can't think of them in different scenarios. So let's talk about the three scenarios. I'm holding up three fingers on the video here. Three scenarios I could be like, okay, three. The cool referees. When you like hit a three pointer, you know, they do the three. Oh, yeah.

As they're running. So cool.

Yeah, yeah. So very cool. Anyways, three scenarios. First one, I want to protect my personal assets, my home, my. My income that I make personally, you know, my bank accounts, all that. I want to protect my personal assets from liabilities and risks in my business or my other companies that I'm.

Or investments.

My investments. Okay.

Or an accident.

Yeah.

I'm taxing into driving. Yep.

Well, no, that's a beat. Something different.

That's gonna be your third area.

Yeah, that would be something different. I'll hit those. So just think of how do I protect my personal assets and check my personal assets from my business.

Okay.

And the liabilities I have, my businesses or my investments. The second thing is what Mark just mentioned there. How do I protect my business assets or my investments from things I do personally? Like the texting and driving example Mark gave. Because I'm doing different. You're doing different strategies depending on what you're wanting to do and protect here. And then the third one would be how do I protect my businesses or my investments from each other so that if I have something happen in one business, it doesn't affect another business or an investment asset I might have or

one rental property affect another one or

one rental property affect another. Exactly.

Okay. So on number two, I want to amend that, if I may. You said, how do I protect my personal assets from my personal actions? I would say protect my personal and business assets from my personal actions.

Yes. Yes.

Yeah.

Now. Yeah. That the chairman will accept the amendment.

Okay. Thank you, sir. With the impeachment rules. Okay, now I want to. Okay, now I want to add another perspective that is far reaching here. When people call me up and go, mark, I need asset protection, I'm like, oh, okay, okay. I always ask two or three questions. Number one, what are these assets you're trying to protect? Well, I just heard I need asset protection. Don't get on the bandwagon of asset protection until you can tell me what asset you're trying to protect. Because if they go, oh, I've got a million dollar home paid for. Okay, that's going to be one strategy. If they go, oh, I've got a million $401k, that's a different strategy. I've got a million dollar apartment building, different strategy. So I want to know which asset or assets you're worried about. That's number one. Number two, I'm going to say, what are you afraid of? Like what's the risk? What are you doing? Are you an open heart surgeon? Are you a NASCAR driver? Are you chasing fast women and fast cars? Or what are you texting and driving every day? Do you have a teenage driver? It's worse than texting and driving, mind you. I mean it was a blizzard in Idaho last night and I've got my 16 year old daughter driving like 30 miles to go to some party. I'm like, what? And these kids, they're, they're just Idaho tough. They're like, I don't care, I'm good. I'm like, we had a little fight, she ran out the door, she got home safe. I mean, I mean these kids are driving to age 14 in Idaho and can pack heat. I mean it's just like it's the lord of the flies out here. But okay, now anyway, so, so I like Matt's categories here of one, I'm trying to protect a personal property from a business risk. Number two, I'm trying to protect a personal or business property, like a rental from a personal risk. And then the third one is I'm trying to protect business properties from other business risks. And so when you get on the phone with your planner, you don't want to get sucked into this. I need, I have clients on probably in our firm, at least one a week that went and spent thousands of dollars on an asset protection plan. And I'm like, what assets do you have? Well, I'm starting to build a rental portfolio. Well, do you have any rentals now? Just one. How much equity? 50 grand. What the freak. You know?

Yeah. Why do you have 15 entities set up by some place of non lawyers sold you some piece of crap?

Yeah, I got this Delaware statutory trust and spendthrift, you know, bonus and this nominee, trustee, nominee manager, my LLC to hide me, blah blah. And I'm like, are they like, they

sold me, I get Unlimited LLC for that. Oh yeah, it was 15 grand, but I get Unlimited LLC. Okay. You know why they did that? Because they know you do not need unlimited llc.

Yeah, I'll give you that deal and then I'll feel guilty and have to go take a shower. But I'll still give it, I'll still take it.

I don't know, we don't actually do that deal. No, we don't okay difference. And that's. That's why we did last week, to try and talk people. It's funny you would think we would talk more people into asset protection structures, which sometimes we do, but it's more likely we're talking people out of something that they got sold on and trying to get them fit into what is right for them. And that's when you get an asset protection. I always like to say, it's like a tailored suit. Don't buy off the rack things. You got to get it tailored for your situation because one, you want to look good. Right. In a nice tailored suit.

I've got an analogy on that. Yeah, I like it. Did you want to finish the analogy any further before I imagine.

I just love a nice tailored suit.

Okay. So if someone comes in and goes, I need a nice tailored suit, I'll say, why? Well, I'm an exec, or I've got. I'm a realtor broker, and I'm out. I need to look good. I present to a wedding, maybe. Are you at a wedding?

Okay, cool.

Uh. Oh, why do you need a tailored suit? Oh, I work at Target on the weekends.

Okay.

You don't need that. Yeah, well, I. Everybody tells me I need a tailored suit. You don't need a tailored suit. And so one last point, and then we're going to get into our list is again, these groups that are out there charging 5, 10, $15,000 for these elaborate asset protection techniques and privacy. And you think they know something more than me and Matt and that's why they're that expensive. Bullcrap. No. There is no other attorney and CPA firm in the country that has more books, more blog articles, more followers on YouTube than us. We are teaching the truth. And if we don't sell it for five or ten or fifteen grand, there's a reason. Can we set you up at Land Trust tomorrow?

Sure.

Can I just let you up a Delaware statutory trust? Sure. Can I set you up in Wyoming with a nominee manager agent? Sure. For some clients we might, but not all of them. And we're not going to charge those exorbitant rates yet. A second or third opinion. You want to go toe to toe? I'll throw down. And I do it all the time in email. I get mad. I'm like, oh, well, I can change the beneficiary of my trust and no one to know and the judge and I can hide and. And, you know, that's the beauty of the trust is I can. That's the asset protection Itself. Yeah. You start looking like a bozo in court on day one, you're going to get treated like one. Judges smell this coming a mile away in the last.

They hate it. So. All right, well, let's hit the first category. Okay. That's the easiest. Let's just go in order. All right, you like it.

Boom, you do it.

All right, how do I protect my personal assets from business or investment risks and liabilities? Okay. Okay.

So if you're the client, I'd say, give me an example. What do you got?

Let's. Let's say I'm a contractor. I'm a. I'm a contractor. And by day, I maybe got some real estate properties that I own long term. And that's my. That's my. That's my business.

So as a contractor, let's assess the risks. I'm going to be hiring subcontractors. I'm going to be building homes. There's going to be trucks and movement. I'm going to have employees, more likely. Contractors do get sued, obviously.

Do. They do.

And he's also got rental properties. So he's got tenants. They could be low income, they could be storage units, and they could be mobile homes. And he's trying to protect. Yep. So we've. We've found the risk. Now what's the asset?

There you go.

And you said personal assets. What are we looking at? Home equity. Home.

I got a home with some equity. I got some money in checking and savings accounts, you know, saving up for the kids.

Home.

I got the job, you know, W2 job. Let's say income. I got some equity in my rentals. You know, maybe I got a second home.

Oh, we're not trying to protect business assets. We're trying to protect personal assets. So we'll get. Number two is when we talk about business assets. Protecting those.

Okay.

Okay, so I got personal assets I'm trying to protect. Home. What about a 401k or IRA?

Oh, yeah, I got those. Yeah.

All right. Beach house.

Could IRA set those up like lake?

Cabin. Grandpa left me Cabin. Beach house. Second home.

Yeah.

Okay, so these are all personal assets.

Yep. Yep.

And we have people come in with this list all the time. Okay, so how do we protect those personal assets from business? Now, I. If I may say, Matt, I'm going to say the first thing. I'm going to add those up. I'm going to just say, dude, girl, you're not worth enough to worry about this. Now, we want to protect your personal assets from your business, so let's Start easy, schmeasy. Matt, what would you say first and I'll go second?

Well, the first thing I would look at is the business you're doing contracting in. I'm going to want to make sure you have an entity for that. Generally, a business like a contractor is going to receive ordinary income. So for tax purposes, we want a S corporation. Now, corporations or LLCs are going to have the same liability treatment that we're looking for here, which is the corporate bail. So if something happens in the business, a sub sues me, I got a construction defect issue. I got a new homeowner that bought or whatever type of contract I'm. They're going to sue my corporation. They can't sue me personally. I didn't do the work. I worked through my business. I used my corporation or my llc. So they're going to be forced to sue the entity and they get stuck there. They can get assets in the company, but they cannot come down to the owner, to me, to my. The equity in my home, to my personal bank account. The scary thing is your personal bank account is garnished. If you have a judgment in your personal name, you basically are not bankable anymore because money can evaporate out of your bank account on a garnishment. And you go to living off of cash and money orders and all this stuff. So we want to avoid that, obviously. And the corporation would be the first step for the construction business.

Okay, so I'm going to call these category A, B and C. And under A, again, we're trying to protect personal assets from business risk. Level one. That's why I'm going with category A, level one, good business entity. Now I just quickly add, a lot of times I go to my client. Okay, cool. You got your entity. When was last time you did minutes? You got bylaws, got operating agreement. Is it everything in good standing with the state. Been filing your returns, how's your separate checking? And you find out real quick the health of that entity. That corporate veil is really thin. They're not doing all the maintenance. They're not doing their things right now. This year, this time of month, every January 15th to February 15th, we do company maintenance at a special for 150 bucks a year. We'll do maintenance for clients and do their minutes and everything. This time of year, we do it for 100 bucks. New clients, every entity they bring to the table, 100 bucks, first year discount. Okay, level two. Level two to me. Matt, I'm going to just throw this out is I'm Going to start looking at asset by asset. I'm going to say, how do I, I've just shielded the business risk from me. But let's just say they get through. Is there something, you know, is there anything level 2 I should be thinking about? Well, this is where some of the stuff is easy, schmeezy. There's, there's no action that you need to take. For example, a 401k and an IRA is going to receive for the most part in large majority statutory protection. A creditor is not going to be able to get at your 401 or IRA, only the IRS or an ex wife or an ex husband in what's called a quadro, they're going to split it up.

Or an IRA in California. California's laws protect IRAs only to the extent necessary to take care of the beneficiary.

Which if you had a huge ira they might get a little bit.

Yeah, very huge IRA and no other assets that could be at risk. But otherwise very, very strong protections. Great place to build wealth.

Okay, number two on level two, we're going to look at asset by asset. We're going to talk about retirement accounts that are generally protected. There's nothing you can do. It's good. It's automatic protection in my book. Under asset protection, I call this automatic. It's automatic. The next one is your home in a lot of states and I'm going to say in most states you're either going to get a homestead exemption or what's called tenancy by the entirety if you're married. And most states are going to give you one of those two, which means they're not going to be able to touch the majority of your home equity. And I've got a table in the back of my book tax and legal playbook that goes through each state, tells you what type of home is protected and how much equity. And if you're married, if it is completely protected, I could read off the list, just get tax and legal playbook@Amazon.com and you could look at that table. But there are many times where your home is very hard to protect. And we'll get to that maybe now, maybe later. But we're talking about California's tough, regrettably, again, very creditor friendly state where if you've got a home that's paid for with a million bucks in it,

not good. Very, very want to prevent a creditor from getting on your personal name, getting adjustment against you personally so the integrity of your entity, which is again like go back to the contractor example, or maybe you're a physician or whatever you do, you know, I mean, you're selling on Amazon. I mean, you're a real estate agent or broker. I don't, you know, whatever. You're going to have risks in your business. That's just to what degree? And so we want to contain those at the company level, prevent them from coming down to you personally, because it is harder once the judgment is against you personally, it is harder to protect your assets. You're fighting upstream. And then we go on, as Mark said, asset by asset, which, by the way, is what the plaintiff's lawyer does. When they get a judgment against you personally, they can drag you into court. And I've done this for clients, drag someone into court. And we went by and they have to do what's called a debtor creditor exam. And you could ask them, and they're under oath. Where's all your assets? Where's your bank accounts? Like, you have to end up the. If you're.

Oh.

If you got a judgment against you personally, you have to volunteer all that information. You don't get a hide and say, you got to find it. You have to volunteer it. And I won't. You're in trouble.

Matt.

I love seriously that you can go to. You can be in contempt of court for failing to do that.

I love it. And I had a very successful dentist in the last two months that I was debating this with. And he was going back and forth between me and this elaborate asset protection proposal he had for 10 to 20 grand and these trusts where he could change the beneficiary, and his name was nowhere, and he was the trustee. And they use this technique. They'll say, well, as long as I don't own it or control it, they can't get it. And I go, yeah, all right, fair enough. Makes sense on paper. But I said, once you get that judgment against you, you're going to have to go into these depositions for lack of a better word or interrogatories, or these creditor exams.

Debtor credit exam, by the way, is once you have a judgment against you, like you're an open court, there's a judge up there. And when I did that, the lady that I had the judgment against for a client was very evasive. We went back in, the judge basically lectured her and said, you better answer all the questions about where the assets are, because she transferred a property. Property to her kids that I knew about. I pulled the title records and that had enough. Plenty of money and equity in it, to satisfy our judgment, we had to go back in. And I basically, we settled the case immediately because she. I knew what had happened. And the judge basically lectured her and said he's going to force it by a court order to get it back. And so the judges are very involved in that process. So it's not a spot you want to be with the judgment against you. And personal assets floating out there in certain categories, again, retirement accounts, they can't touch equity in your home. There's limitations on creditors there. We're going to get to the next phase of assets and business entities rather than your personal name. So, yeah, no, I love it.

And, and I, this, this dentist that I was debating it with said, well, Mark, I can always change the beneficiary or my trustee. And so I can honestly answer without line in court or contempt of court, and I can hide my assets with this smoke and mirrors of these Trusts and these DSTs and things like that. And I said, okay, yeah, but guess what? At the end of the day, these are going to be on your tax return. Do you think the judge is going to not give the tax return to the creditor to see where all of your assets really, you know, are? And if a judge smells this smoke and mirror stuff, they're gonna say, really? And there's court cases out there on this. They're like, yeah, tell the truth or go to jail.

Yeah, yeah. And this is the classic example of asset protection. You know, experts, gurus, whatever you want to call them. And I say the guru in a negative way, who do not give a crap about how this affects your tax situation. If you're just changing beneficiaries on trust and you're really changing the ownership of who owns this asset, you have a gift tax issue. You just gifted an asset. If you're like, well, I'll just throw my kid's name on this as the current beneficiaries. Okay, did you file a gift tax return and pay gift tax on that?

Is it still an asset that had

a lot of value in it that you didn't want a creditor to get? You probably didn't. And now you've got a tax liability, an issue that now you got the IRS chasing you down. You just earned another creditor. Yep.

All right, now, I want to give some real meat here. I know some of you listening here, like Mark, give me some actionable items. So when we talked about the retirement accounts are automatic, and in most states, there's going to be some sort of automatic protection for the equity in your home. But let's stick with the home for a minute because this is going to play out in section in category B and C as well. So let's just cut it off.

In the states on the home, you do need to record something called the homestead exemption. There's a few states. So check the tax legal playbook. There's a guide on it.

Yep. And I'm going to repeat what Matt just said to in. In most states it's going to be automatic. That do provide protection. But in some states, you have to record some sort of paperwork at the county to get that benefit. So you don't want to just assume the home and how much is protected. Some states is 100%. You got to be careful. Okay, now what happens if you're in one of these states where your equity exceeds the homestead exemption or is crappy, and I hate to harp on California, New York, Illinois, some of these big states where people have very valuable homes that have a lot of equity? What do you do? Really? You're down to a couple options, frankly. One of them is called equity stripping. Now, there's a smoke and mirror strategy and a legitimate strategy. The legitimate strategy is you go get a home equity line against your home, which you may be. I don't want to do that. I just paid it off. Well, guess what, you're texting and driving tomorrow and there's a judgment. You can't go move the home to your kids on the next day. It's not fair, not going to happen. So you got this equity, you're just driving around with. Think about that, 500 grand, 300 grand, million. You got this home paid for and you're just driving around town, you look the wrong way and get in an accident, there's darn right they're going to come after the equity in your home in excess of any insurance policy limits that may not cover the damage. So equity stripping is where you take out a second mortgage or a HELOC against your home and take that money and invest it to the same degree of percent rate that it's going to cost us to service the helocopter. So if the HELOC is 5% interest, you're going to turn around and invest the HELOC for 5 to 6% interest and make sure you can service the debt. And that way, if there's an accident, you've got this mortgage lien against your home. Now you may say, well, now I got to protect that investment asset. Right. And that's an investment asset and we're going to come to cabins and cash here in a minute. But the first thing is to just create problems for a creditor. You want to strip the equity up. The smoke and mirror strategy is, and I have clients that do this, we'll set up an entity privacy strategy and maybe a Wyoming structure where no one know who owns it or whatever. And then we lean your home. Now, no, he lock actually stripped that equity out. There's really no Converse investment taking place, but on paper it looks like a strip. And so what happens is creditors that are not savvy enough will see that and throw up their arms and walk away. Now, is it in the bot at the end of the day? Is it completely successful? No, but it can make things harder for creditor and sometimes get rid of the lazy creditor that doesn't have enough cash to trace you down. So you've got tenancy by the entirety, you got the homestead exemption exemption, you got equity stripping. And then again, there's nothing wrong with a little umbrella insurance and making sure you're doing an annual review on your insurance policy for your home, making sure you've got strong policy limits. If you've got teenage drivers. You need to be extra diligent on this and look at the risk. Again, if you have high, high risk type business, you're going to even be more aggressive on the protection of the equity in your home. And there are certain trusts you can use that are irrevocable. We talked about the domestic asset protection Trust. I've got a YouTube video in the newsletter this week on this. The domestic asset protection trust is another way to protect the home in about 17 states. So, Matt, I just wanted to get that home protection topic out there because it's going to permeate category B and C as well.

Yeah, yeah. And equity stripping. You know, Mark's got some YouTube videos on that I'm sure. Just type in equity stripping. Make sure you're looking for markjcohler.com that we, you know, if you're on YouTube searching for equity stripping, I don't know what's going to come up but. And you might get some weird ads on the Internet as you're floating around after you search for that. But so you know, just a little disclaimer there. But let's go from the dapt, because the dapt, the Domestic Asset Protection Trust, which is a trust structure we like and again it's in 17 states. That is a great way to protect your personal assets because what the Domestic Asset Protection trust does is it says if you have personal assets in your trust, in this domestic asset protection trust, and there's a creditor that has a judgment against Matt Sorensen personally. But Matt Sorensen's assets are in his domestic asset protection trust. Even his home, even his bank accounts. Creditor cannot go in and get those. So now it's not available in every state. So you got to look at the list. That could be a good consideration for you. And we like it for clients that at least have a million dollars in assets to think of a debt and, you know, personal assets that could be at risk if you, if you don't have that or you're not, you only got 100,000 or so of equity in your home and other significant assets, we're generally not going to do that, but we like to look at the dapped in that, in maybe that scenario if you're in those states. So that's probably the best. All right, number one strategy to protect your personal assets if you're in those states.

Yep. Now, I'm going to make a level three comment here. We're still in category A, but these level one, two and threes are going to be similar in B and C, so we're going to go through those quicker. We just got to get the table set, if you will. It'll be easier to explain the dessert menu here once all the plates and silverwares on the table. So level three is going to be what's called a COPE Entity Charging Order Protection Entity. This is an entity like an llc, for example, that would hold maybe that investment that you stripped out of your home. So maybe it's 100 grand, maybe it's a million dollars. It could be a cabin, it could be a beach house, a lake house,

a farm brokerage account, maybe with a

lot of brokerage account. Now, this is not your IRA money, this is not your 401k money. This is not your home. This is extra investments that are personal use. And you're saying, I want to protect this second home I inherited from grandma. We're going to talk about copes now. Copes, these charge and order protection entities, they're valid in about 13 states. You can multi layer these. We can use them with other structures to create a little more depth and aggressiveness. But we're talking maybe 1,000 to $2,000, very affordable maintenance per year, two to three, $400 max. And we're not talking about these five to 10 to 15 or $20,000 structures with Unlimited LLC or something that you don't need And I know in California you're thinking, oh, I got this $800 minimum tax. I need to use a trust structure. I know what you're getting sold. You don't think I know that? I know exactly what they're selling you. And if you want to go pay 10 grand for this structure, you just bought yourself 10 years of $800 minimum taxes. Seriously. And that's not to count the annual maintenance and the complexity. Just buck up and pay the freaking $800. Chill out. You know, it's not the end of the world. It's an insurance policy, so people overly concern themselves with that. But anyway, in my book, the tax and legal Playbook, I have a whole chapter on copes. You can. I've got videos on it. We talk about them more in depth in other locations. But the COPE is going to be an entity, in summary, an entity to hold real estate, personal property, collector cars, money in a bank account, brokerage account. That makes it much more difficult for a creditor to get at, even if they get through the business.

Matt's level one is your personal creditor. This is like Mark Kohler's got a judgment against them and someone's trying to get at Mark Kohler's assets. But Mark Kohler's got a huge real estate portfolio, let's say, and he used a cope, a charging order protection entity, as his holding company, maybe let's say that then owned all of his other property LLCs that own his whole real estate portfolio. That's a common time. We would use a COPE or your cabin example or whatever it may be. But this is a Mark Kohler creditor coming after Mark Kohler personally. But he's got a lot of assets and equity value in business or investment entity assets.

Okay, now and Matt just bled into category B now. And let's just. Okay, yeah, well, seriously, because here's the point. Category A was personal assets from a business liability. Okay, now level one, let's just make sure your business liability corporate veil is strong. But what if they pierce it?

Yeah.

Which could happen. So that's why, Matt, I went through. Okay, protect the home, automatic for 401k IRA, how to protect the cabin or second home or beach house. So we're going to go through the retirement strategies, the home strategy, the cope. We're still in category A now. Am I going to use some of these in category B and C? Absolutely. But if I'm trying to take my personal for my business, these are some of the things I'm going to look at now. I'm going to set up the tee it up here for Matt and he's going to walk up with his driver, stretch a little bit and he's going to hit 300 yard drive here in

Category open is here in Phoenix. So.

Yeah, that's right. The Phoenix opens there.

I'm playing

in your dream. Yeah, he's playing Xbox. Phoenix Open. Okay. Category B was protecting my personal and business investments from personal actions. So now once I get this business real estate portfolio, which Matt opened the door to, I've got five or 10 rental properties with a million dollars of equity. How do I protect those? Matt hit the ball. Now we're talking about again, now we're talking about this.

Yeah. This holding company structure where you may use a Wyoming entity that's the more efficient state for this charging order protection and the chart. And that entity then owns the property holding entities that each own the different various rentals across your portfolio. And so that way if something happens to. Let's say this is Mark Kohler, let's say, you know, I don't want to

be sued so much.

This is my example. Mark gets sued personal. Okay. He says something defamatory, you know, Mountain Dew sues him because he said some bad stuff about Mountain Dew. And they get a judgment against Mark J. Kohler personally. Okay. All right. So now they go to his rental properties and he has the. What they're going to do is they're going to say, first we want to get anything in Mark's name. Then they're going to say, hey, he's got these rental properties that have a lot of equity in them. But if those are owned in a. He's got a Wyoming LLC that's a charging order protection entity. They got to break through that first because they got to go from Mark to. What does he own? He owns the charging order protection, any llc. And Nevada has other states. We just like Wyoming because it's more efficient. They can get a judgment against the Wyoming llc, but it's called this charging order judgment. And it basically tells the creditor, you can't get into this company. You can't force them to sell the properties. You can't go into the other LLCs. This holding company owns. You're stuck here. Now, they still got a judgment against you. Mark still got a judgment in his personal name. He's got to worry about that. But he's got a big negotiating tool now because all the assets, the creditor can't force anything. They're just sitting there waiting. So now you've Got an ability to negotiate that order. That's why it's called a charging order. Because the company is charged with an order, but they don't have to satisfy it yet until they want to distribute money down to Mark in the example here.

I love it. Now, another important perspective here is some people will say, why already have an llc? And they go, doesn't that protect my rentals? No. Back in category A, the LLC's primary purpose is to protect you from the renters in your rentals, not to protect the rental property from you being an idiot. See, that moves us into category B. See, a was I need to protect myself from the rental. Category B is I need to protect the rental from me. And that's where you go, well, I already have an LLC. No, no, no, no. In 27 different states, they can blow through your LLC and take the property. I set up an LLC for the rental, but that doesn't protect the rental from your teenage driver who just got in an accident this weekend.

Yeah. And let me give another example for those of you in partnership scenarios. Mark and I own some LLC that own some rental properties. Let's say. Let's say that a lawsuit. Okay, all right, all right. I get Rockstar. Rockstar sues me, whatever. I get a judgment against me personally or I default on a credit card, whatever. You know, you get a judgment against you personally, and they say, hey, we want to go after this. You have this LLC with Mark Kohler. We want to force to sell the asset. Well, in almost every state, a court's going to say, no, you don't get that. All you get is a charging order. We're not going to let a creditor in there. Mark's your partner. He has nothing to do with that judgment. You know, Rockstar loves him. They didn't sue him. And so, so, so you. That's where you get the charging order. Now, every state said, we want to give a charging order in that situation. We don't want to let creditors in to force the sale of assets and entities and hurt other partners. Yeah, they're the innocent partner. And this can even be a spouse sometimes. But some were the only owner. Yeah. Or it's your trust or, you know, or you're in a spousal situation. And most states do not respect that. They're going to let the creditor blow through it. It's called single member llc generally. And except in certain states like Wyoming, Nevada, there's a few others where in the law, they've built in a protection that says charge Order protection applies regardless. One owner, multiple owners, doesn't have a wife or husband and wife, you get protection.

And see, that's why these 13 states, they say, well, we'll, we'll grab the husband, wife LLC and give it to you. But all the states are going to generally protect a partnership between Matt and I because it's not fair. I get sued as well and lose my rental. So, but this is tricky, right? That's where the asset protection comes in. But people, we knock this out in an hour, consult, we get your entity up and going, you're out the door for less than 1500 bucks. A lot of times with an entity maintenance structure in place and you didn't need all this elaborate crap. You know, with this, I'm going to get unlimited LLC garbage or whatever. So be cautious on this. This is stuff that really works. Now, in summary of option B, I mean of category B, we've got personal and business assets. We already went through how to protect personal assets.

Cool.

Now we're trying to protect business assets from our personal actions and that COPE entity, which is level three and option A, comes back in full board to help us out. So we love that. When we start trying to protect business assets from personal actions, that's where we might start using some gifting to get family, other family members involved because it is technically a single member LLC or it's just me and my spouse. So I want to get the family involved. I want to get this, this partnership protection, even though I'm in a state that normally doesn't have that. What do I need to do? And so those are the things we're going to need to do and maybe adapt can work. Matt and I have set up DAPs for clients for their rental portfolio, but it can be more cumbersome because now you have a DAPT that controls your rental group and you. So what we like the DAPT to do is the DAP is the owner of an LLC and you're the manager of the llc, but not the trustee of the dapt. So there's some ways we can get you control, but you're going to have your hands tied. I normally discourage clients from using a DAPT for business property because what happens if you want to sell the business? You got to get your DAP trustee involved. And you know, that's where DAPs work really well for primary residences or farms or second homes. Yeah.

Okay.

Now, third category, Matt, which you've got some great articles on this as well, is now I want to protect business assets which are Going to typically be rental properties or intellectual property business locations. I want to protect them against or from each other. So give us a good example of what you normally see.

I love it. Yeah. So you could have just multiple rental properties. Let's just keep it simple. You know, these can be single family rentals, multifamily, whatever, but they're separate properties and they have enough equity.

Now.

Sometimes clients will think, I need an LLC for every property.

Not really.

I mean, do you have a lot of equity in the property? Because what we're talking about now is protecting assets or businesses from each other is what value do those assets have between each other? So if I've got 10 properties that have $10,000 of equity each, I've only got 100,000 of equity I'm trying to protect. But let's say I've got two properties, each of them that have 300,000 of equity. I got 600 grand of equity to protect. I would rather have one LLC for 10 because I only got 100 grand of equity I'm protecting between them. But then I would say I'm going to do two LLCs for those two properties, each have 300 grand because I want to separate the risk. Because if I have every asset in. Let's go Back to the 10. If I got 10 properties in one LLC, something goes wrong on property number one. They can sue the LLC and get it all. 10 properties. I only got 100 grand of equity. There's not no big deal. But if I got the two properties in the same LLC, something goes wrong on property number one. Both property one and two are at risk. I got 600 grand, now liable. That's a much bigger deal. And so we're looking at the equity and the value of these businesses and assets when we split them up. Our rule of thumb is 250 grand. If you have 250 grand or more of equity, we're going to recommend splitting up multiple assets, multiple properties, into their own separate LLCs. That's when the cost of the LLC is going to be worth the additional asset protection risk. So we're trying to take a measured approach that so you're not over to an overkill, but you're also not, you know, putting all your eggs in one basket and having and lacking enough asset protection.

You just said the analogy I wanted to use, and that was eggs in a basket. I think that puts it in a visual sense in the easiest manner for people thinking about this. And sometimes you can throw those crappy Easter eggs that you're never Going to eat and are smelly and your kids, you know, dipped them in who knows what color. They look more like mud. You're going to throw 10 or 20 eggs into one basket, but fresh eggs and you're going to eat them the next day and all that. You want to be careful with them. So separate baskets could work. You don't want to stack them too high. You want to be careful. And so I think that visual example really helps as you approach this. And there's a lot of dynamics here. You could be dealing with different states. You could be dealing with different types of property that have different risk. I could have a 4 plex for a frat house near a college. I could have, you know, a golf course rental for a little grandma that's retired. I could have an apartment building. I could have storage units. I could be in one state versus another state. I could have notes or precious metals or some other type of investment. And do I want to have that in the same LLC with a low income section 8 rental property? And so we've got to look at these dynamics and create a plan that makes sense for your tax return as well. That's why being in our house here, the KQS, K&E accounting and the Directed IRA House of Companies, we've got 60 to 70 employees that are, upon your authorization, sharing files and talking. Next week, Matt and I are spending two days with our accounting firm training the lawyers and accountants in the same room. How many of us would like that? My accountant and lawyer are on the same page. Every six months we take a huge investment of pulling everybody off billable time, putting them in a room and saying, let's get all on the same page. What's new? And Matt and I will sit just like this.

What's the new strategies? What should we be doing?

Yeah, what's working? So when you get on the phone, this dynamic strategy of eggs in a basket, we're also looking at the tax impact, the accounting impact. How much work is it going to be to maintain this thing? And that really plays into it as well. And again, just an hour consult once or twice a year with your advisor. We can put it in perspective and not overdo it.

Yeah. Let me throw out one other thing on this multi asset structure. And this could be multiple restaurants. Let's say you're a multi restaurant location business, right. Or you have a, you know, retail stores that have multi location. You're gonna have a separate entity owning each location. Typically. Now some an entity that works in many states is called a Series llc. So rather than setting up just a separate brand new llc, there's almost half the states now have a series LLC statute. And the series LLC is basically one LLC at the state level that you then adopt series for. And each series gets separate liability treatment. So If I got 10 properties, let's say that had a lot enough equity here, right between the 10, I got over 250 grand of equity. We're gonna do one series and. Or, sorry, one series with the state that you filed the parent, master parent, and then you set up the sub series LLC that it would on property number one. And I just put one property in series one, another property in series two, and those each get separate liability treatment. Now you gotta have separate bank accounts for each and they're gonna have separate names for them and I'll deed the properties separate. But that's a nice way where you don't have multiple llc, just get the series treatment and that's called a series llc. And we've been setting those up for years. Very, very good strategy, particularly for real estate clients in those 20 or so states that have it, that have multi properties. Really good structure.

I love it. Now I want to finish. I think we're getting to the end here. We take whatever time it takes to get through the topic. Sometimes our shows are less than an hour, sometimes they're more than an hour. We appreciate your patience here and many of you that commute or catch this and listen to it while you're on the treadmill. It might take you a couple days to get through this. It's a marathon. You don't know, but it's good. Okay, this is another. To me, this is one of the most important points today. And there's probably five or six, and we've got a story that goes with this. And so this could be the golden nugget of the. No, no, the juicy nugget. You know where I'm going, Matt.

Okay. Yeah.

Okay. Now this is a story that I'm going to let Matt, but I'm going to set the table.

So.

All right, I'm going to tee it up again for you.

Yeah. Okay.

Let me know what you're wanting that live this story. This is good. This is better than Rainmaker. The client and the firm wrapped into one. Matt Sorenson did this. Okay. So you cannot sign out yet.

Okay.

Okay. Now here's the caution. Many, many clients hear this podcast and we'll take it and run right here. They'll go, okay, I need an LLC here. I need an LLC here. Oh, I'm going to do a series LLC and I'm going to have these little sub llc. I love it. You guys are the best. And they run the legalzoom, set it up, and they think, oh, with all these LLCs, I could run maybe one checkbook. Oh, and I had a phone call this week. The client was like, well, I have all my employees in the parent, and then I'm going to have all these subs, and then the employees can be just working for the different subs. And I go, whoa, whoa, whoa, whoa. If you're going to set up separate LLC or subs of a series llc, that's great. Stand behind it. But you have to treat each of them independently. You cannot be sharing employees, sharing office equipment, sharing supplies, because if I'm the creditor, I'm going to go, what the hell? This isn't a series llc. That is actually subs that stand alone. This is one big llc and you're commingling crap and employees and assets and equipment. We can't respect this. You didn't treat them independently. Now, a case where there's a significant accident in a sub, and boy, did they want to get at the parent.

Yeah.

At Sorenson. Yeah. So is yours. So we represented from Arizona.

Okay, let me. This is a sad story.

Yeah.

Died.

I'm sorry.

There's a plane crash. There's people on the plane that died, and there was people that owned the plane that were basically being sued. So we represented some of these families at the time that we'd known that, you know, tragic story. And we were. We were helping them. And there was other lawyers involved.

You know, I just set up this great story. And then you had to take us down a notch. No, I know we're sensitive to that, but usually behind every lawsuit there is a tragedy, right?

Yes.

Someone got ran over, someone got hurt. And in this case, it was an airplane with 12 people that died in a. Yeah. In a bad case situation.

And so now the company that owned the plane, of course, whose pilot was flying it is like, hey, one of the defenses they had initially with all the plan stores was, hey, this was owned in a separate llc. We have our main company over here that we've got, you know, a million to 100 million plus business. Almost a billion.

Yeah.

And you can't come over here because that's a separate company. This is so you can come after this llc. But you know what? The only thing this LLC owned was

a plane and the insurance policy.

So there's insurance.

The insurance policy, yeah. See you later.

The insurance policy would have maybe taken care of two people on the plane, not 12. Okay. I mean, we're talking millions of dollars. Tens of. I mean, tens of millions. Couldn't even over a hundred million at the end of the day. I don't remember what the total number. It was a lot.

Okay, okay, let's set the stage even more. This company was. They felt bad.

They did. Right. They wanted to resolve it, but they were also trying to get away with only paying what they had to.

Yeah.

And their defense was. Sorry, you have this llc, doesn't own anything. You're stuck here. Okay, so we're all at the table, all the plants.

This is like a movie right here. Matt Sorensen is at the table.

Yeah, we're negotiating. We're making our points, right. We're trying to figure out the process, how we're going to resolve this and settle it by not going to court. And they were being cooperative on their part.

They're. You got to make this better. This is like my cousin Vinnie or something. Ham it up. I mean, there was like, 12 lawyers at the table. This was a big table.

Right. You know, this is like six. Six lawyers there representing plaintiffs. And then there was the. A few other lawyers for the. On representing the. You know, would be the defendants here. You know, and it was a. Yeah, executives are there. There CEOs there. And. And it's not a depot. It was just. We were just talking. We were just trying to find a way to resolve this without getting lawsuits filed.

Okay, so Better Call Saul. This is like the big, long table. Better Call Saul. All these attorneys are around the table, and everybody's like, we'd love to help you, but it was in this llc. And Matt Sorenson. This is Matt Sorenson, guys. The co host of this show starts asking the CEO some questions.

So I asked. I asked. So they're basically. Again, the point is, we had this llc. How about it doesn't own anything. You can't come over to our main company. So I asked, because the pilot was employed by them. I said, where did the pilot get their paycheck? Did this LLC pay him? Nope.

Yeah, the CEO popped off.

Yeah. Nope. The general counsel. The company is like, oh, my gosh, stop talking. You know, it's like, okay, where do you get his W2 from the main company? So they were not treating it separate. They were not treating the LLC as a separate entity. They were paying it out of the main company because it was easier. That's the person flying the plane. That's the liability, you know, that's exactly why they did it. It was easier. Easy. We're already running payroll here. The pilot did some other work in that company, and so now we had exposure into that main company, and they. They had to basically conceive on that point. And this limitation. You are terrible at telling the llc.

You are terrible at telling these stories. Okay, I got to take. I got to hijack this. Okay, so Matt. Pretty good, Matt. No, no, this is how you tell it. Matt's there. The CEO is just, you know, this bigger guy. He's kind of commandeering the room. Everybody watches him as he talks because he's the head honcho. Everybody's on his payroll.

This part's fiction, but keep going.

No, Matt asked him, where was he on payroll? And he says, well, the main company. He said, the company name. We won't disclose that. And. And that's when I think you said, oh, corporate counsel. Right. See, you remember this?

Well, coming. But couldn't. Couldn't. Couldn't stop it, because I got the question in, and he's. I was. I asked this. Is he getting paid from just the main parent company? Yes. Done. The other lawyers. The other plaintiff's lawyers looked at me, and one of them, like, made eye contact with me and was like, oh. It was like, dude.

And you said.

Then we left the room. Then we left the room after this. And this other lawyer came up to me and said, that was a juicy nugget. Now, you know why Mark and I make the joke of juicy nugget.

But, yeah, and. And the corporate counsel put his hand on the CEO and said, room scatters. Yeah, see, See, you just. You got to be better at this. So the room scatters. All the paralegals are flurrying around Matt Sorensen over by the water cooler, and this other attorney comes up and goes, that was a juicy nugget. Then on Law and Order, it goes to commercial, comes back, and they're. Right now, big checks to all. The family didn't even go to trial because they knew Matt Sorenson had him.

Yeah, okay, see, that's why I didn't say this. Mark's gonna get throwing some fiction here to, you know, make it more appropriate for television audiences.

But I thought.

Important lesson that was totally accurate. Okay, yeah, yeah, but really important lesson that, seriously, if. And this is what you see, and this is this language, this little line is in plenty of court cases. If you want separate liability treatment, you have to treat the company separate. So if you're act. You're running all your operations out of the main parent company or one of the main companies you use just because it's easier. You don't want to have multiple checkbooks and all these, you know. Well, the court's not going to treat it as a separate entity. So you have to respect that. And you're if you're going with this separate any structure because you want the separate protection, keep separate bank accounts, pay those things separately, title assets separately, treat them separate if you want the separate liability protection.

And Matt Sorenson, that's a juicy nugget.

Drawn down. Yeah.

All right, Matt. I loved it. That was, I think that was a great story to finish up with our inaugural video audio simulcast. Simul. Simulcast. What do you call it? Sim.

I don't know what even a simulcast means.

Well, it means we're doing video and audio at the same time.

Oh, okay.

You make it this so difficult, you know, get on. This is edutainment.

Yeah. Yeah. Well, if you made it this long, thanks for listening. Subscribe right on YouTube. Give us 5 stars wherever you're listening to us on the podcast app. We really appreciate all of you for tuning in. And we'll be back next week with Open Forum.

We'll see you next week. Bring on those questions. Let's stump Matt Sorenson. It's hard to do. Thanks for listening to another hour of refreshing strategies to better live your American dream. Don't forget to get your free copy of Mark and Matt's ebooks and sign up for their weekly free newsletter with important tax deductions, lines and articles at refreshyourwealth. Com.