The Reasons Why You Need Effective Asset Protection Services

Hey, it's Mark Podolski, the land geek with your favorite niche real estate website, thelandgeek.com and on this week's podcast, we have someone that's really going to save our behinds. You're going to go to bed at night just like a, like a, like with a weighted blanket. You're just going to feel safe and secure. It's going to be so nice. But before we talk to our guests, I'd be remiss if I didn't properly introduce my co host. You know him, you love him. The brain, the professor, your flight school sherpa. Scott Todd from scotttodd.net landmodo.com learn anything about anything. Investorninjas.com Scott Todd, how are you?

Mark? I'm great.

How are you?

I'm great. I'm very excited to talk to Doug Laudnow. He is the managing partner and co founder of Lodmel and he is in estate planning, taxation and strategic asset protection and is just the attorney to save you from big trouble. He has an LLM in taxation from NYU School of Law. He got his JD from Cardoza School of Law. He's a big deal. A big deal. So Doug, welcome.

Thank you. Great to be here. And I got guitars and drums in the background. So I mean, really, you know, what's more important, the law thing or the music thing?

I think it depends on how big your estate is.

Yeah, that's right.

So if you have a big estate, you're gonna say, I need asset protection, Right?

Then you just want to jam.

Yeah, yeah, exactly. So Doug, let's just rewind the tape. And how and why did you get into asset protection?

Well, that's a really interesting question. A lot of people don't always ask me that. They just kind of go straight for what is asset protection? But the how I got into it actually answers a whole bunch of questions. My father is an attorney and has been an attorney for now almost 50 years. And in the 80s he really quit practicing law. And he was doing land deals, believe it or not. He was doing syndications in real estate in Arizona, in the Valley. So at one point, him and his investors owned a whole bunch of land all around Chandler Airport. He would go knock on farmers doors, literally say, hey, would you like to sell your land? Buy the acre. And then they would hold it for 10 or 15 or even 20 years and then they would sell it by the foot at a massive profit. What happened? If you all remember, if you're old enough to Remember, in the 80s we had the SNL crisis in Arizona, it was a big deal and a lot of people went bankrupt. A lot of the investors that he had in his deals had financial trouble. And when they came, when their creditors came to get into these real estate syndications, the creditors found something out and that's that you can't break up a real estate syndication if you're just a limited partner. You can't do anything. You just gotta sit there and wait for this thing to mature. You have no control. You might have a judgment against an investor and the money might be sitting there in the value, but you couldn't get it. And so he watched his clients, his investor clients, settle over and over with banks and their other creditors because they had the money, but the creditors couldn't reach it. And he thought, wow, that is very interesting. That actually worked extremely well. What if we did that on purpose? That really was his light bulb moment of let's think about this from an asset protection standpoint. That was a byproduct of being a real estate syndicated investor. He said, let's do it on purpose. So he actually started traveling around the world. It happened to coincide with 1984, the Cook Islands passing the first Trust act, which allowed for a special type of trust known as an asset protection trust. And from there he basically dove headfirst into asset protection. I ultimately went to law school and I joined him because I loved that area law. I knew I was going to do it, so I didn't have to mess around with any other area. I focused, I did my LLM in tax because tax is very relevant when you're talking about international and, and all sorts of tax related things. And it helps me communicate with CPAs. So that's how I ended up in it. It was very organic on the part of my father, realizing that this actually worked. And then it became very conscious developing a structure that was designed to work. And now 25 years later, we have proven over and over that it really does work.

Very, very cool. Scott Todd, what are your thoughts on asset protection? We don't really talk about this a lot.

I mean, I do think that it has a lot to do with like the, the size of the asset, right? You know, the size of the estate. Because like, I've seen people that, they, they'll go through the mundane process mark of like, you know, my average purchase on a piece of land is around $2,000. So, okay, so I buy a piece of property for like $2,000. We sell that property for $8,000. And so I will see Like, I've talked to somebody who said I only put one property in an llc. And I'm like, why? You know, ultimate protection. I'm like, protection from.

Right, right.

And they're like, well, from the guy that comes onto the property and falls. And I'm like, in all of the times that you have had these properties, how many times has that happened? Name it. Okay. And so ultimately, my whole point of this is that you can. You have to look to me, you have to look at the asset that you're protecting and the exposure, the liability. Because if you're spinning expenses for, you know, ll, every LLC is annual fees. Every LLC is a whole tax thing, like accounting, separation of all of this stuff. It's expensive to try to offset something that might happen. Once out of X times that you, okay, you could take that money, bank it. So I think that you really have to look at asset planning and really talk to professionals, say, like, well, what am I trying to protect here? And at what cost is it worth it? Before I just say I'm just going to take a loss sometimes. And that's just the way that it is.

So, Doug, what don't we know? We don't know when it comes to asset protection, right?

So, Scott, what you're talking about is inside liabilities. So what most people don't know that they don't know is, is that there's a difference between the types of liabilities that you can protect against. So when we talk about land, everybody jumps straight to inside liability. And what I mean by inside liability is the liability created by the land itself. So, right. If you've got a piece of land, it's a piece of raw dirt, you're buying it and you're going to turn around and sell it. You know, you don't have much into it. That's not a very risky asset. The inside liability, the chance that somebody's going to come on that land and hurt themselves on that land because of the land and then sue the owner of the land is very low, very low. And excuse me, that was me. And so the inside liability is something that's also covered by insurance. So if you have insurance on the land and you have a blanket policy on top of that, there's really not much risk. But when I talk about land, I'm talking about often, most often the outside liability. And the outside liability is liability that occurs that has nothing to do with the land. It's because you're a doctor and you get sued for malpractice or you're an employer and you have an employee claim, or you're just driving your car and you get into an accident, it's a $10 million claim, and you have only a million dollars of insurance. Those are liabilities that are outside of the land. They have nothing to do with the land. Now they're looking at you as a creditor. That's all. And they're saying, what do you got? I'd like to get it because you now owe me this million dollars or this $10 million. And if you've got a huge land portfolio sitting in your name, it's very easy for them to get. So, Scott, you're right. It's a function of what's the value of the land. I'm with you. I do not like an LLC for every single piece of property. It's a nightmare. But you might want one LLC to do all your deals in, especially at a certain price point. Or what I like to do is actually divide up the properties into tranches. For me, the number's about a half a million dollars worth of property per llc. And when I say property, I mean equity, not just value. So that means that you actually have a half a million dollars of equity. So my average client might be coming in and they might have 10 pieces of property. But these aren't raw land flips. These are investment real estate that's rented. And so we might do three LLCs for those 10 pieces of property because. Because it's a million and a half dollars of total value. And three LLCs make sense. And then we would do a holding company to hold those. And that client also might have $750,000 of cash and securities and liquid investments. Those are assets that they want to protect. They need to retire. This is important money to them. And if they have an outside liability, something that happens, we need a way to shield those assets. And so understanding that difference, the inside versus the outside is critical because I think a lot of people are focused on the inside. They think, oh, my God, my tenants, the risk, all that is the big risk. It's really not inside. Is covered by insurance 99% of the time. And it's not the wipeout type of liability usually anyway, so it's outside that I care more about. But the answer is, yeah, how much equity do you have? How much value do you have as a. As. What's your net worth? What's your total net worth and what makes sense? I'm about making sense. Let's not make it any more complicated than it needs to be. But let's make it just as complicated as it does need to be to do the job of protecting the assets. If everything is sitting in your name, you've got no protection. So if you do have an outside liability, you can just expect it to be satisfied with, you know, writs of execution and then grabbing your assets. So most people are not excited about that.

That makes sense. So, Doug, what's the vehicle then that we would use to protect our assets, preserve our wealth?

Well, there's more than one. It's not just one, but LLCs are a great starting point. So, you know, you guys mentioned them. They're good for wrapping up. I see those as like Ziploc bags. So each LLC is like a Ziploc bag. And let's say your, your assets are apples, right? And so you might put one apple in a Ziploc bag, or if you have those little, little baby crown apples, you might put five in the same Ziploc bag. Just know that if there's a worm in that apple, everything in that bag can get infected because the worm can, can go through everything in the Ziploc bag, but it won't go out of the Ziploc bag. Now, once you have the Ziploc bag, where are you going to put that? That's where the holding company comes in. And so for a holding company, I use a similar tool called a limited partnership. This is the exact tool that my father used 40 years ago in those syndications. And to this day, if you do real estate syndications, you're probably going to be a limited partner in a limited partnership. That is the standard tool. It's standard because it has really good features to it. When I use it for asset protection, I make it something that is basically unique to your family. It's your holding company, it's your limited partnership, and it can own the LLCs that own the risky assets. If you have a boat, we're going to probably put it in an llc. If you have an airplane, we'll probably put that in a different llc. So anything that's risky, we're going to want to wrap up to some degree. Those LLCs can be owned by the holding company. If you own them all and they're single member, they're disregarded for tax purposes. This simplifies the tax reporting because you won't have a tax return for every single LLC that you have. You can just have one tax return for the holding company. The holding company in turn can hold your cash and your securities and your notes receivable and Anything that's securitized, anything that's non risky in and of itself. And then depending on the level of assets, we may use one more tool, which is called an asset protection trust. And an asset protection trust is a trust designed specifically to protect your assets from your creditors. You're the beneficiary of this trust, it's still your money. But if a creditor comes, this trust can actually say, sorry, not making any distributions to you, unable to access assets of the trust. And this can be done in as complicated as a fully offshore trust in a jurisdiction like the Cook Islands, or it can be done domestically or it can be done in a hybrid fashion, which I call a bridge trust, which is really the way that most of my clients would, would go is the hybr fashion in the bridge trust.

Why, why do you say that? Why the bridge trust? Why not just go straight to the Cook Islands? Or why not stay domestic? And you know, we, we feel pretty confident about our government.

Yeah, right.

That's got Todd.

But I do so, so why not go offshore is really just a function of cost and compliance. That's it. So offshore is more expensive. You have an offshore trustee, you have to pay. I tell clients they need to budget around 10,000 a year to maintain a fully foreign trust. So clearly it's the best when it comes to protecting because the foreign jurisdiction does not have to recognize US Judgments. It absolutely. You have to start your case over. You have to prove your case beyond a reasonable doubt. It's very difficult to get into an offshore trust. Very difficult. But you pay for that. So you have maintenance costs of 10,000 a year. You're going to have IRS compliance requirements, which is a Form 3520 and a 3520A, which is a form, full balance sheet disclosure of all the trust assets, a listing of all the parties to the trust, including the protector, the beneficiaries, and that goes to the irs. Most people aren't super excited about that. It's not an extra tax, it's just disclosure. But if you don't have to, why. So that's why most people don't go straight offshore. Just cost compliance and control. Of course, if you go offshore, the offshore trustee needs to be in control of the trust. So a lot of people aren't quite ready to give up that control. Your other question was, well, why not just stay domestic? Well, the problem with domestic is that it hasn't worked. We have a lot of cases now. The domestic trust came around in 1998, whereas the foreign trusts have been around since 1984 and the domestic trusts have just proven not to work nearly as well. We've got lots of case law and by and large they've just failed. So I'm not a big fan of the domestic trust simply because they haven't shown to work. I am a big fan of the foreign trust because they have shown to work. And frankly, there's just a better option, which is the bridge trust. So all a bridge trust is, Mark, is it's a foreign trust that for the purposes of the IRS is bridged back into the United States and is considered domestic. So it's a foreign trust treated like a domestic trust for tax purposes. So you get the best of both. You get the foreign trust protection without all the compliance, without all the additional costs, and it's treated just like a US Domestic grantor trust.

I love it. Scott Todd, what's your thoughts?

Ben? I mean, you know, it sounds like a process that's been proven and tested out, you know. You know, it sounds like a lot, Mark. It sounds like he's got a recipe.

He's got a recipe. Yeah, recipe, yeah.

Well, I mean recipes work, right? That's how you make the best stuff is you figure it out once you don't reinvent the wheel every time you go, okay, what works? And then you tweak the recipe as you get more experience. So my recipe has been tweaked for sure since day one when I did this. And every year I tweak it, but always to the better and always staying within the context of what I know works.

So Scott Todd's a pilot, he owns his own airplane. What is to stop me knowing that he's a high net worth individual from just suing him?

Nothing is to stop you. Nothing is to stop you from suing him. That's the problem with our legal system is that there is no stop. Just because you know the guy is enough. You can go, hey, he told me he was going to give me a ride in the airplane to Vegas. He didn't. And I was going to bet black and I didn't get that chance. And I would have won a hundred million dollars and I didn't win because he didn't give me the ride to Vegas in his private airplane.

This conversation, can we stop this hike where this is going to.

So wait, so how would Scott protect himself then? What is a way that he could then shield himself from someone like me going after him?

Right, So I mean, anybody can sue anybody for any reason at any time. You don't have to really state your case, and you can get them into a massive legal expense budget. And if you ultimately lose the case because it was a bs, you know, malarkey case to begin with, you don't have to pay Scott back all the legal fees he spent. That's set up in order to specifically use our system to hijack people for money. It's just. It's. It's extortion. I call it legal extortion. I wrote a book called the Hijacking of Justice in America, you know, and it's about legal extortion. So how you protect yourself is one. You know, you do the best job you can dealing with people that are ethical. Obviously, be very careful who you get into business with, who you. Who you do anything with, because everybody is a potential liability, and that includes your employees, includes your business partners, everybody. The second thing is, is you make yourself an unattractive target by removing your assets. So that. So that. Let's say he does get sued. He can come to me if he's already done this plan, and I can write a letter saying, hey, he's uncollectible. There's nothing you're going to be able to get. It culminates in this offshore trust. Good luck. And that is very powerful in dissuading the other side from going forward, especially if the case is bs, which many of them are. So, yeah, asset protection, it's like insurance, except it's not focused on a specific type of liability. It's focused on the assets themselves. So sometimes I call it net worth insurance. You're basically taking your net worth and you're insuring it. You're insuring the asset. You're not insuring. You're ensuring the asset is able to be protected from a liability. It should go hand in glove with insurance, which I hope, Scott, you have on your plane and your house and your car and everything else in your life. So insurance is good. And then we ensure that the assets are unable to be reached because we've got them protected.

All right, well, if you're listening to this, I'm not planting any seeds. Do not sue us. No, we will counter sue with Doug.

That's right.

I'm suing you.

Yeah, exactly. I mean, you know, you guys joke about that, but every bad case I've seen from clients was. Was a countersuit. So clients will sue. Just thinking, oh, they did me wrong, and they sue, not really understanding what they are opening up. And the other side is far more aggressive and far more prepared, and they Countersue, and then the countersuit is what usually bites you. So, yeah, I mean, I'm not a fan of suing because it is a double edged sword and I have seen it turned around so fast. The jujitsu of some of these attorneys is brutal. Don't mess around with the legal system. Stay out of it.

That's the best, that's the best tip right there.

There you go. You wanted the tip of the day. Stay out of the legal system.

There you go. Which I'll give it to you because we're actually at that point now in the podcast. We want to ask Doug, first tip of the week, A website resource, maybe another book, something else actionable for the autopsy to go improve their businesses, improve their lives. Doug, is that your tip? Stay out of the legal system.

Okay, so, so my tip is stay out of the legal system. Don't, don't think it's an easy way for you to, you know, get something done because it, it is a, it is a whipsaw. It comes around and bites the unprepared. The actual thing I'll say is I did write a guide specifically on protecting real estate. It's a, it's a topic that people are confused about. Protecting cash is easy. You can send it offshore to the offshore trust in a Swiss bank. I mean, it's kind of a, you know, sounds very James Bond, but it's very effective and very easy to do with real estate. It's physical, it's here. So a lot of, even attorneys misunderstand and don't think it can be protected because it's physically in the jurisdiction of the court. That's not correct. Real estate can be protected and I've written an entire guide on it. So if you, if you want, I will send anybody who wants that guide, that guide. And you can just email me and I'll, I'll email you back with the guide. Great.

I'll put it in the show notes. Your email, which is dougmail.com.

Just my name, dougmail.com.

Yeah, yeah, I want that. I don't want you to send it to Scott Todd.

Oh, don't send it to Scott Todd. Okay, Scott, for the airplane, we need to talk. I mean, make sure you got that. I am also a pilot and have an airplane. So we got something to talk about.

There you go.

Oh, no. There's an in group and there's an out group. I think I'm in the out group.

You just got put in the out group.

We could start geeking out again. Here's the question I have for you, do you use a Mac or a PC?

Oh, you know what, that is so funny. I used a Mac and then I went to Costco to get my Mac and they didn't. I mean, I used a PC, I went to Costco to get my PC, they didn't have me, so I got a Mac and then I realized, oh my God, this thing completely integrates with my phone. It's so much better. So now I'm back to Mac, I'm both. But Mac is.

See, Mark, look at this. Both. Listen to what he just said.

Both. I like both. PCs have a definite advantage and Mac has this integration. Like all of a sudden my phone rings and I can talk on my computer. Computer with the good mic and everything. So, you know, I kind of like it.

All right, fine. Both is fine. So before we get to Scott Todd's of the week, I want to just mention our sponsor this week, which is flight school. Learn how the next 16 weeks can literally transform your life. Go up that mountain of land investing with Scott Todd as your Sherpa who's done it thousands of times. Work in real time with Scott and go up that mountain quickly, safely and efficiently. And the best part is that tuition for flight school ain't gonna cost you nothing because you're gonna make back that money 180 days less, guaranteed. Just show us your work. Learn more. Go to thelandgeek.com training and start building that passive income machine with Scott Todd thelandgeek.com training alright Scott, what do you got?

Mark, check this out. Sometimes you want to like have this big reveal of a link or something, right? So like you're like, you want to build some excitement with your list. You want them kind of waiting like this is going to be released at a certain time. Well, here's a. And then like if they're on this link, then it would release it to them. So essentially, check out this company. It's called you are urlcast IO. So there's the company and I'm going to put in the chat this special one that I have, the special link that I created. So if you click the second link, you'll see that I'm gonna take you and Doug if you click that link somewhere cool in 2 minutes and 36 seconds.

Wow.

Oh, I like this.

I clicked it.

I'm in. I could do this for every email. Wait and see where I can take you.

What's that?

I can do this for every email.

Every email.

It's a surprise. Everybody likes the Surprise.

We're going to release. I don't know if I could say this, because I don't want to be political here, but, like, this could be the equivalent of, like, releasing the Kraken, right? Like, wow. I should say that people are gonna be like, you just brought politics, and I'm not. I'm just saying, like, I like that.

Well, as good as this is, we still gotta wait another minute. My tip of the week is one that is going to help you sleep well at night knowing that your assets protected, your wealth is protected. You owe it to yourself. You owe it to your family. To learn more, go to lodmel.com and start getting into it. Get a consultation with Doug and start learning about all the different ways that you can protect your hiney and all your assets. Lodmel calm. I'll have a link to it. Doug, are we good?

Yeah. That's it. I mean, you know, it's a whole bunch of complicated stuff, but in reality, it's simple. You got assets. Look at how you can protect them. And. And you won't be sorry because, you know, stuff does happen.

Stuff does happen. Scott, Todd, are we good?

We're good, Mark. Just for everybody listening in on this, you can't see, but we have a minute and a minute even before we release Doug and Mark to this secret place that I've set up for them.

I mean, should we just. Just talk about something for the next minute?

I mean, it's 50 seconds now. We can probably kill that 50 seconds. Yeah.

So 45 seconds.

What is your favorite lunch spot right now in Scottsdale, Arizona? If. If Scott Todd ever flies back in post Covid. Where would I take him?

Zinc Bistro at Kierland. It's a French restaurant. It's awesome. It's consistent. You got outside seating. You can bring your dog and hang out. Zinc Bistro, Scottsdale, Kierlin Mall.

I love.

I love Zinc Bistro. And the same people that own Fat Ox.

Yeah. And the Mission.

Right, and the Mission. Very good stuff.

Solid people.

Scott's a foodie. So, Scott, do you like mussels? They got the best mussels.

The moul. Oh, that's what my wife orders every time. Yeah, and she's French, so, you know, it's good.

Oh, there we go.

It's taking you.

It took us to Google.

I took you to Google.

I don't think that was worth the wait.

Wow.

Wow. You know what? Doug and I are never gonna get that minute back.

Listen, but it was fun. We talked about. You guys talked about a restaurant. And also, it just shows you the power of this. This tip of the week where we wanted to stay on to see where it took us.

That's right. That's right.

It does show us the power. But then you've got to deal with the disappointment.

Now, listen, Google does not disappoint. I'm sorry.

Yeah, that's pretty much where everybody goes every day. So, you know, really did take us to the best spot.

I took you to the number one spot on the web.

Yeah.

Well, you two flyboys just go ahead and collude together. That's fine. I just want to thank the listeners and remind them the only way, the only way we're going to get the quality guests like douglademail.com is if you do this three little favors. You got to subscribe, rate, review the podcast. Send us a screenshot of that review to support@thelandgeek.com we're going to send you for free the whole tailing course. How to double your money, 30 days or less. Please do it. All right. Ready to do this?

Yeah.

One, two, three. Let freedom ring.

Ring.

There you go. Thanks, everybody.

Thanks for listening to the Art of Passive Income podcast. Start your journey at www.thelandgate.com and www.scotttod.net. rate and review the podcast and email support at thelandgeek. Com. Your screenshot for a free Passive Income launch kit.