How To Protect Your Assets and Investments

Hey, it's Mark Podolski, the land geek with your favorite niche real estate website, www.thelandgeek.com. and today's guest is going to protect us. Before I talk to today's guest, I'd be remiss if I didn't properly introduce my co host. You know him, you love him. Scott Todd from Scott todd.net landmodo.com if you're not automating your craigslist and your Facebook postings, posting domination.com TheLandgeek Learn anything about anything? Investor ninjas.com Scott Todd. How are you, Mark?

I'm great.

How are you?

I'm great, I'm great. Do you feel protected, Scott?

Well, that depends. Protected against like, I don't know, bears and dragons? Probably, yeah. But other things maybe not. I don't know.

Well, I don't know. We're gonna find out if you're protector or not because today's guest is Brian Bradley from Bradley Legal Corporation. If you're not familiar with Brian, he's a big deal. He's one of the top lawyers in the country. He's got distinctions From Top Lawyers, 2019 Super Lawyers Rising Star List 2015 Nominated America's Top 100 High Stakes Litigators List. Nominated 2017 Law Firm 500 Award. He represents self made entrepreneurs, professional athletes, business owners, medical doctors, real estate investors, those investing in cash flowing properties. Brian Bradley, welcome.

Thanks Mark, for that intro. I kind of feel like Ron Burgundy here. You know, I have many mahogany colored books. It's a great intro. Thanks.

You're a big deal, Brian.

Kind of a big deal here.

Kind of a big deal.

Yeah. All seriousness, thanks for having me on and putting this together and I think, you know, going to break down a really big and confusing topic that's going to be necessary for all of you people investing or thinking of investing, how to protect it and kind of what are some higher levels of asset protection?

Okay, let's just pick on Scott Todd because it's fun to pick on Scott Todd. Okay, Scott. I mean, I'm not even exaggerating. He's not just rich, he's wealthy. Okay. He's got lots of assets. He, I mean he owns a plane, he owns his home, he has, you know, llc, he has many companies, he has, I don't, Scott, I don't even know how much property you have in inventory.

A lot.

A lot.

A lot, a lot. So I, if I had to guess, he's got a couple LLCs. But if I had a guess, I would say that we could do a lot with Scott Todd to make sure that someone like me who's feeling a little litigious because, oh, I don't know, Scott comes to boot camp, trips me inadvertently, I. And then I go sue him because, you know, he's wealthy. Why not?

Got the big bad.

By the way, for those of you listening to the podcast, I'm just joking about Scott Todd's wealth. Don't sue him.

Yeah, it's just all this a hypothetical.

It's all. It's all hypothetical.

It doesn't exist.

So, Brian, how would you start with a guy like Scott?

Yeah, so? Well, a guy like Scott, I would first look and say, I think people first need to understand, like, what really is asset protection, you know, and it's not what you would think that you watch from the movies. We're not trying to hide taxes or hinder taxes, not pay taxes. It's all tax neutral, you know, really, we're talking about just peace of mind and how to protect yourself, decrease your financial stress and knowing if something happened and you were Scott, and Scott ended up getting preyed upon because he is visible. You already got all these pieces in place to actually protect yourself, not after the fact. Judges don't want to see you setting all this up after the fact. And so what we're really doing is looking at what Scott has, what he owns, whether it's businesses, whether it's real estate businesses and real estate. What's your profession? What are all the different risks that you have? We go through your risk profile and your ownerships of everything that you have, and then we kind of put together your financial profile here, and then we see what needs to be put into what. So if you're owning real estate and you're owning it in your personal name, we start with an LLC. And then as you start getting those LLCs, we start putting those into asset management companies. And then when you're a big boy like Scott and you have over a million dollars in net worth, we start talking about asset protection protection trust. And so we can break down that roadmap in more detail, but that's just the general umbrella landscape of how this works.

So what is an asset protection trust?

What is that? Yeah, so once you have all your, you know, you have some LLCs, and you have your properties in there, and then we have an asset management company that then we put those LLCs into to hold those. The issue is really, they're still not protected. You know, there's still the US Constitution and the US Constitution. You can't run from judgments, which is good. That's how our legal system is set up. But you're not protected from rogue judges or spending a lot of money on litigation that you shouldn't have. And so as a protection trust, I'm going to break down first talking about jurisdiction. But a trust is just like a living, you know, revocable living trust. But these are specifically drafted to hold your assets in there. And they have spendthrift clauses, they have a lot of teeth to where someone were to try to attack them. Creditors can't get access to them. But the best way to break this down is jurisdiction. And then comparing domestic offshore asset protection trust with offshore asset protection trusts. And what jurisdiction means is that the laws and the rules that govern you and trust and states and business organizations are all different from one state to another, from one country to another. And you kind of think about older movies where criminal law movies, there's a body that falls on the county line and the sheriff and the cop of the other county are fighting over, it's my jurisdiction, it's my case. And it's like, no, it's mine. You're trying to figure out what laws apply. And you have two options when you set up asset protection trusts. You can create them domestically here in the US in like Alaska or Nevada or 17 states, or you can set them up offshores in a country like the Cook Islands. The famous Cook Islands I think a lot of people have heard about. Personally when you start getting into higher net worths. I prefer the power of going offshore and only when it's needed. And not everybody's ever going to need to go offshore. But if you start turning that million dollar mark, it's a good option to know about. The reason I prefer the power of going offshore is because the Cook Islands has what's called statutory non recognition, which is just a really fancy word for saying go pound sand at the end of the day. So you have a US based judgment and you take that judgment to the offshore Cook Islands trustee. The trustee is going to, we have statutory non recognition. We don't care. Go pound sand. You have to file a lawsuit here in the Cook Islands, which is exceptionally hard. You basically have to prove your case by the murdered standard, which is beyond a reasonable doubt. You'd have to front the plaintiff all the court costs and then fly in a judge from New Zealand. And then if you lose, you also then pay the other party's legal fees to be there. So imagine just having to go and fly everybody to the Cook Islands. That's going to be a lot of money. They're going to have to pay, pay back. The statute of limitations is going to run most likely before they even had a chance to sue you because there's only one year to file a lawsuit there. You can't amend your complaint once you file it like you can in the US but there's pros and cons to everything. Just like when you're using LLCs or anything else, you know, not everything. Sunshine and rainbows, they're going to be expensive. They're going to be effective as heck. I mean, statutory non recognition, you're not going to really, you know, do much better than that. But they fail on control, cost and compliance just because you. For them to work, you have to be out of control. So subject to the foreign trustee, your annual maintenance is going to be really high. You're going to talk about 5,000 to $10,000 a year. And then to be purely foreign, you have a lot more IRS compliance and reporting. You're not hiding what you have, which is, you know, you don't need to statutory non recognition, but you're making all of your disclosures that you have to make of what you have in that trust. And so we only put about 5% of our clients in there. For most people it's overkill. But then we can compare and contrast this to purely domestic asset protection trusts. Like you're a California resident and you want a Nevada Asset protection Trust. That's really not the best idea anymore. They're great ideas and they're good because they're less expensive. If you're insecure about going offshore, you don't have to worry about that component. But on effectiveness and control, they fail. And they fail because of just the foundation of asset protection. It's to not recognize a judgment or a court order. But we have the US Legal system and the Constitution, the full faith and credit clause, meaning every state has to give full faith and credit to the judicial proceedings of every other state. And now we're starting to see, because I'm also a trial lawyer, litigation attorney, what we're seeing in court is a pattern of these domestic US based asset protection trusts just being completely pierced and the choice of law clauses not being honored. And the judges are saying, well, you're a California resident and you have a Nevada asset protection Trust. You're not a resident of Nevada. Why do I care? And I don't. And so they're not upholding them anymore. And you're starting to see these rulings state by state coming Down. And so there is a way to hybrid these two together, domestic asset protection trust with the foreign asset protection trust. And it's called a bridge trust. And you're just taking the best of both worlds and putting them all together. And so a bridge trust was created about 30 years ago by one of my affiliates. And then what you do is it's a domestic asset protection trust and a foreign asset protection trust all combined into one at the same time. Your assets are all in the domestic component, safe and sound here in the US and then if and when you're ever sued, a threat happens, like a lawsuit, you just cross the bridge to the safety of the Cook Islands. If and when you're ever under attack, the attack is over. The assets come back once you settle the case. And so that's a good way to have both, you know, the ease and flexibility of a US based domestic asset protection trust with the strength and power of the Go Pound sand option in your back pocket.

Okay, so if I'm understanding this correctly, state laws, federal laws, insurance policies, trusts, limited partnerships, and LLCs provide some benefit, but separately, they cannot protect everything. All your assets.

Exactly.

You basically come up with a comprehensive plan.

So LLC are great. You know, they're good starting points. I'm not gonna, you know, I use them, I set them up, but it's entry level, basic protection, you know, and just look at, you know, llc. What's the very first word in the llc? Limited. They don't hide the fact that it's limited. They're just saying, hey, we're gonna give you some limited protection as the owner. But what happens, they can be pierced. And it's very easy to pierce these. And once they're pierced, all the assets in there are open for a judgment. And I'm going to break this down a little bit, even in more detail. It's called legal versus practical authority. And so this is a really big deal to understand. And what you're talking about is especially for real estate investors. And the reason is the reality is that a judge can do whatever they want. A local judge could order property sold, no matter who they're entitled to. The judge can disregard the LLCs or LPs, piercing the corporate veil. You can have strong judgment, you know, creditor orders that say you're only going to get an exclusive remedy of the charging order. This all works in theory, though. Courts and litigation doesn't work, just theoretical. You have what's called practical authority. This is what actually happens in court, and this is the power that judges actually have. To make decisions. A judge has very broad powers to reaching your assets, including seizing them, placing a lien on them, foreclosing on them. They can order sheriff sales or clearing title to enable a clean sell, wage garnishments. The problem is judges, even without the legal authority to do this, do these things all the time by exercising what's called practical authority. Even if the judge wants to be right past civil wrongs, there's nothing that's really going to stop the judge. And then you're going to have to go spend more money once this is all over on an appeal and, and hope that you win this back on an appeal. And this can all be done in direct contradiction to just established state laws, statutes. It's just the functionality of what happens with the court's actual authority. And so the only real solution here, if you really care about your protection, is just to hinder a judge's practical authority over your assets. And that's where the strong guns come out of. I have an asset protection trust. I have the bridge trust, which means I have the power of the Cook Islands. I don't care about your judgment. My assets now transferred over to the Cook Islands. My offshore trustee is not going to do anything about it. Let's make a deal. We'll settle this case for a penny on the dollar. And that's kind of, that's how that is played out.

I see. What about somebody like Scott and I, that we might have thousands of inexpensive assets all put into, you know, a few different LLCs. Can we put all this into one sort of trust then? And then how would, then when we have to convey ownership to our, our new owner that pays off their note? What's, how does that sort of work?

Yeah, that's a good question. And so one of the issues is why you don't want to keep just stuffing as many assets, thousands of assets into one LLC is if one property goes boom, everything else is open to us to a judgment. So you want to start limiting how many assets you put into each llc, because if one property explodes or one asset explodes, you can't stop an exploding asset. You just want to separate its damage that it can cause to the rest of them. So you start putting them into other LLCs. But then this can get expensive. So then you create what's called a limited partnership. But when they're created for asset protection, we call them asset management limited partnerships, AMLPs. And these have two separate types of ownership. They have a general partnership ownership and a minority share ownership. All your LLCs go into the general partnership ownership. You can put bonds, cash, gold, whatever you want. You can transfer your ownership, your title. You know, you're not like physically taking a house or car and putting it into it. So you're, you're taking your title and you're putting, you're transferring it out of your personal name and into the name of an LLC or the LP or an asset management limited partnership or into the trust. And then what you do is on the minority ownership share of that asset management limited partnership. That's where the true protection comes in. Because that bridge trust or foreign asset protection trust owns that AMLP that manages everything. And that's where the true protection comes into play. And it actually streams line your taxes because that asset management limited partnership is only filing one tax return. And so that company then owns your ownership shares of your LLCs. You put your LLCs into there, you put all of your assets into that, and it actually streamlines your tax filing.

Scott Todd, what do you think?

Well, I mean, I think that you have to really look at the risk, right? Like, what are the risks of your business? You really have to talk to a professional, understand, like, what those risks are. Because sometimes you might think that there's a lot of risk in your business, and other times there may not be, right? So that's why you engage a professional like Brian, and you get Brian in there and say, hey, Brian, like, here's my business, here's the structure, here's all the things I own. And then you have that professional, like, lay it down. I think the problem is, is that a lot of times when people start off in their business, everybody talks about the llc, right? Like, oh, let's just go for the llc. And then they go and they create an llc and they don't know what they're doing, right? You know, and so then that's one group of people. They just go and they create an llc. They don't know what the heck they're doing. The next thing you know, they got like this LLC and they've got like way too many assets in that one llc. Or then you have the other people that they don't ever take action to go even get going, because the first thing that they want to do is I got, I can't do anything until I create my llc, right? Like, that's the other extreme of it. So get going, do something. Listen to what Brian said. Brian said, like, if you have some assets in your name, there's no problem with that. Like, just do something. But then look at the risk that comes as you grow, engage someone, a professional to help you gauge the risk and then create the structure, the organizational structure for your company based on those risks.

Exactly. And I find that's exactly what it is, is you have two types of personalities also. You have the DIY er, who's not going to take the professional's advice. I'll just go do this myself. Well, that's never going to be upheld in court. If you're ever challenged, you didn't know how to do it, you didn't set it up right, you probably did your financing and funding completely wrong on how to transfer your assets into there. That's going to be destroyed. Use your professionals. And then you have your afraid to launch type of people who just keep analysis paralysis. I'm going to keep research and keep researching and I'll get to it later on. I'll get to it later on. But the problem is the longer you procrastinate and the more you add, there's a. You're increasing, it's a law of probability. You're increasing your percentage chance of being sued and preyed upon. So I would say you don't have to always go for the big guns. And if I have clients that call and say, oh, I want the bridge trust, well, I'm like, I'm sorry, I'm not going to sell you something that's, you know, $30,000 when there's no need for you to have that right now you scale up. You know, where you start in life isn't always where you're going to be. And if you're just starting out, get the assets out of your personal name, like get an llc. And then as you grow, you might have a two or three llc. Next stop on the road, asset management, limited partnership. Then you're going to hit that 1 million, 2.5 million mark, become an accredited investor. That's when you need to know, like, oh, hey, I remember Brian talking about, you know, asset Protection Trust. And there's something about domestic versus foreign and a way to combine them. I need to start thinking about that. And that's how you scale this up. And you just realize where you start is not where you're going to end. And so you just need to go along the journey as an investor. But understand there's limits to what each stop has in its protection as you go along. And the more you have, the more visible you are. And really that 1 million to 2.5 million range is a big danger zone for most investors. And that's because it's taking you a really long time, most likely to earn that amount. But you're at that point where one stupid accident, drinking and driving or lending your car out to somebody, a fire on a property, the stuff that you don't think about can completely wipe everything out from that person and they're never going to recover from it. That $5 million mark, that's going to be a floating rib shot where you're going to say, I felt it. That hurt. It might take me five years to recover from this. And then the 10 million plus guys can take those shots and just keep going. But they already have this set up.

Well, I think this has been really valuable. And you know, obviously what Brian just said is really the sort of your next action step is just to start leveling up and protecting yourself. So, Brian, right at that point now in the podcasts where we're going to ask you for your tip of the week, a website, a resource, a book, something else actionable for the art of passive income listeners to go improve their businesses, improve their lives. What have you got?

Yeah, I would just say, you know, use your teams. You know, don't think you can. You're used to diying everything yourselves. I'm sure as investors and business startups don't do that for your protection systems. You got to be proactive, plan for it, budget now, you know, budget for it now. Use your teams and just don't do this yourself. You're going to save time, energy, and money doing it right the first time.

All right, I love it, Scott. Todd, what's your tip of the week?

Mark, I'll tell you what. I've recently been using a new tool to keep a little bit more organized. I know that you like Basecamp and this is actually Free camp. It's similar, but it's pretty cool. Some pretty cool features in there. And like, anything you can start off for free. I always say start off for free if you can. Unlimited projects, task storage, users, free forever. So check it out. It's a great tool to keep everything organized. It has some features of Trello, which I really like as well. Zapier integration. Check it out.

Wait, it's Basecamp for free?

Yeah, yeah, it's free Camp, so it's free.

Let me check this out.

E e d camp. Readcamp.com readcamp.com and basically, you know, it's. It's very similar to Basecamp. For those of you that are familiar with Basecamp, it's there, but they've got some pretty cool things in There you can have like, Wikipedia stuff, issue trackers.

I don't know.

It's pretty, pretty cool. And if you, if you get into the paid thing, you can actually even white label it too, if that's important to your business.

Very cool. So, wow, let's check this out. Is this, is this mainly for individuals or is it more for companies? Companies, you know, you can, you can.

Add team members, etc. So, yeah, it's a pretty cool deal.

And it's free.

As you, it gives you a certain level of like, disk space, storage, whatever. And then as you grow it, you, you might need more things.

But yeah, all right, cool. I like it. Very cool. All right, well, my tip of the week is actually going to save you millions of dollars, so take that. Scott Todd, no offense, but check out more about protecting your assets, preserving your wealth. Go to btb, btb, Bradley Thomas Bradley Legal Comm, BTB Legal Comm. And you can learn more about everything we just talked about as far as asset management, limited partnerships, bridge trusts, and even just leveling up your, your LLC. So go to BTB legal.com to learn more and start protecting your assets, start protecting your wealth. It's never too early to start planning. And just like what, you know, what Brian said is that, you know, these are the things that we never really think about. And you want to be that pig that builds their house full of bricks. You don't want to, you know, be exposed. And, you know, all of a sudden the big bad wolf comes. You're like, there it goes. And you got to start from scratch. So go do that. Brian Bradley, are we good?

Yeah, I think we covered some good, you know, information for all your listeners there. And, you know, just like you said, you know, level up, build a house of brick.

All right, Scott Todd, are we good?

We're good, Mark.

All right. I want to thank the listeners. Just remind them that today's podcast is sponsored by flight school. Learn more. Just go to landgeek.com and learn how 16 weeks can change your life. Going up the mountain of land investing with Scott Todd himself, Azure Sherpa schedule a call thelandgeek.com training if you're getting value out of these podcasts, the biggest favor you can give us is if you do three little things. It takes literally less than a minute. You got to subscribe, you have to rate, you have to review the podcast. Send us a screenshot of that review to support at the Land Geek Calm. We're going to send you for free the $97 passive income launch gate course, as well as the latest whole tailing course, how to double your money in 30 days or less. All right, thanks, everybody. Scott, you ready? One, two, three. Let freedom ring. All right. Brian's like, man, I knew they're like that. I don't know if I would.

I thought you're going to ask me to join in.

All right. Yeah. Let freedom ring. Ryan. Thanks.

Freedom ring.