This week I felt it would be important to address the topic, “What is Asset Protection?”  While you clearly have some idea what is involved in asset protection planning, I frequently get this question or some derivation thereof.

The quick and simple answer is that asset protection is a means of protecting your assets from future potential creditors or claimants.  From this perspective, a better definition may be that asset protection is a systemic approach to pre-litigation planning to deter lawsuits and encourage out-of-court settlements.

Another explanation may be that asset protection planning involves minimizing your personal and financial risks.  At Global Wealth Protection, we accomplish this with a 2 step process;

1. Create a veil of privacy for you and your assets
2. Create legal structures to segregate you from your assets while maintaining maximum control

By doing these 2 steps, we have accomplished the goal of making you appear unattractive to potential future creditors and claimants as well as provided you with the legal protections for those assets in the event that your veil of privacy is pierced.

Of course many people believe that they are not a target for litigation.  I have talked to enough people (read about  Susan and Frank – “Oh Good, the Government is Here to Help”), to know that lawsuits can come from nearly any source; tenants, credit card companies, friends, family, neighbors, contractors, coworkers, employers, employees, customers, and the list goes on and on.

There are many tools that can be used in asset protection planning.  One of the most basic tools is a Wyoming Limited Liability company (LLC).  A properly structured Wyoming LLC can offer you privacy (ownership is not disclosed to the state) and legal protections (Wyoming does not allow foreclosure of business assets) for your real estate, investment portfolios, private business interests, intellectual property, or nearly any other category of valuable asset.

Land trusts when combined with one or more Wyoming LLC’s can also be a very cost effective structure for protecting your real estate assets.  I work with many real estate investors who like this method as it offers them complete anonymity as well as legal asset protection from potential creditors.

I wrote a newsletter a couple of weeks ago titled, “Protect Your Assets Like the Uber-Rich” that addressed the specific topic of real estate asset protection.  After writing this article I had a couple of calls from friends of mine who are real estate investment professionals.  One has been in the business for over 10 years and another for over 30 years and both of them said this was the only method they use for protecting their real estate assets.

I am a firm believer in diversification of your assets among various investment categories as well as geographical diversification, or what I call ‘geo-arbitrage’.  This is effectively a ‘don’t put your eggs in one basket’ strategy from a global viewpoint.  I highly encourage clients to implement an offshore strategy as part of their asset protection planning.

At a minimum, clients should have an offshore bank account with some funds set aside for a rainy day.  You can grow your offshore presence with precious metals storage, brokerage accounts, or even managed accounts for the wealthier individuals.  The offshore world is the ideal scenario for web-based entrepreneurs.

For our online entrepreneur clients, we typically help them establish a Seychelles or Belize offshore company, offshore bank account, and offshore merchant account.  This gives online entrepreneurs an excellent opportunity to diversify geographically as well as lower his cost of doing business.

For those of you not up to date on US news, the FATCA requirements that are part of the HIRE act will make it much more difficult to set up and maintain offshore bank accounts and investments after 2013.  You have a very short window of opportunity to escape the draconian reporting and withholding requirements and establish your own offshore asset protection plan.

For those of you interested in developing your own private offshore asset protection plan, I can work with you one-on-one to formulate a strategy that works for your specific situation.

I will summarize by saying the 2 biggest mistakes people make are; 1- assuming they aren’t wealthy enough to need asset protection planning, and 2- waiting until it’s too late.

If you have a level of wealth that you cannot afford to lose, you need to minimize your risk.  And you need to do it before you have already been sued.  It will be much easier and cheaper to do it before it becomes necessary.

Call today to schedule your free 30 minute asset protection consultation.  Until next week, live well.

In my consulting business, I frequently work with real estate investors who are interested in creating a bulletproof asset protection plan to shield themselves from predatory litigation.  From my viewpoint, real estate investors have one of the highest risk profiles of any business person.

Clearly the world is more litigious today than it was just 10 years ago.  I call this phenomenon ‘wealth through litigation’.  It is a sad state of affairs when the average American now believes his path to riches lies not with hard work, but with winning a big lawsuit or the lottery.

The litigation problem real estate investors face is twofold – huge exposure and ease of collection.  Later in this newsletter I will provide you with an option to virtually eliminate both of those risks, but for now, let me explain with a hypothetical story.

Mike Smith is an average guy who has worked hard, saved money, and invested in residential rental properties in his hometown.  Mike has spent the past 10 years building a sizeable portfolio of rental properties that now totals 25 homes.  His average rental is valued at $100,000; therefore he is controlling $2.5M in assets.  With $1M in various mortgages, this gives him a net worth of $1.5M.

Mike pays about $7000 per month in mortgage payments, puts aside another $7000 per month for repairs and vacancies and collects $20,000 per month in gross rents.  This leaves him with $6000 in net profit.

At his job, he earns about $150,000 per year.  This gives Mike a net worth of $1.5M and an annual income of $222,000.  Sounds pretty decent, right?  The problem is Mike has a huge bull’s-eye on his back now.  While he may not be rich in today’s standards of Wall Street bankers and political lobbyists, he does has a sizeable net worth and income level.

With this target painted on Mike, he is now financially susceptible to every potential future creditor.  The list of predators is virtually endless.

However, right now is quite possibly a once in a lifetime opportunity to become a residential real estate mogul.  As you can see from the graph below, housing prices were climbing steadily from 2000 until the crisis began in 2007 where there was a rapid decline and now it appears an uptrend is firmly in place.

There are other demographic issues here that may also provide a tailwind to the rental real estate market.  With millions of people having their homes foreclosed on over the past couple of years, there are a lot of people with bad credit scores which place them outside of the realm of bank financing.

We are also seeing an idealogical shift much like the transformation that happened after the great depression in 1929.  During this era people began to dramatically cut back their spending habits and focus on self-sustainability.  Even the wealthier folks who lived through that time decided that there was no need for their previously opulent lifestyles.

This shift in thought process is happening today as well.  I’ve had conversations with several highly successful entrepreneur friends who have made dramatic shifts in their lifestyle even though it wasn’t financially necessary.

In addition to this shift, technological advances over the past few years have provided the ability for workers to be much more transient than before – moving from city to city chasing job opportunities as well as working from a home location more conducive to their lifestyle whilst working remotely.

These various trends have already begun and are creating a shift from home ownership to home rental.  I see huge opportunities over the  upcoming years for those real estate entrepreneurs willing to work hard and take advantage of this economic transformation.

Of course, herein also lies the problem.  Once you begin to develop this portfolio of assets, like Mike Smith, you also increase the size of your bull’s-eye.  Do not lose sight of the pitfalls while pursuing the opportunity.

I work with many real estate investors today and one of the biggest problems they face with a properly structured asset protection plan is cost.  Asset protection planning can get expensive and it rarely offers any immediate benefit.  It’s like buying disability insurance for an Olympic athelete, it’s just hard to justify.

I always advocate getting your personal assets out of your own name as well as segretation of the assets themselves.  However, when you are talking about a house that may only cost $50,000, spending $2,000 on a properly stuctured LLC can get cost prohibitive.  Especially if you own 25 rental houses.

Using LLC’s is a great way to go as long as they are properly structured, but this requires cafeful planning, registration in the right state and a bulletproof operating agreement.  This really isn’t a DIY task.

Another option that is rarely discussed and used almost exclusively by the uber-rich is to have a land trust hold title to your property and use this same properly structured LLC as the trustee.

A land trust can be created for significantly less money than an LLC and because a land trust is not recorded in any public record, it offers you complete anonymity for your real estate holdings.

In the  above example with Mike Smith, you could implement a structure using 25 separate land trusts and one or two LLC’s as opposed to 25 LLC’s.  This would be significantly more cost effective and equally (if not moreso) as beneficial.

You would create a separate land trust for each property owned and then use the same LLC as the trustee for each of them.

A land trust is a legal entity that exists solely for the purpose of holding assets.  A trust has three main elements:

1. Beneficiary – the individual(s) who control the trust and its assets.  As a beneficiary, you have control of the property held in trust just as if you were the owner and are entitled to profits from the rental or sale of the asset.
2. Trustee – The individual (or other entity like an LLC) who actually owns the property in trust.  The trustee has the management responsibility of the assets distributing profits according to the terms of the agreement.
3. Trust agreement – This contract outlines the terms of how the trust is managed and administered.  It spells out the responsibilities of the beneficiaries and the trustee.

The benefits of using a land trust are;

1. Privacy of ownership – The property owner of record is only disclosed in the trust agreement.  The trust agreement which lists the beneficiaries is not a matter of public record allowing you to retain full control of the asset without creating a public record of your beneficial ownership.  This is an ideal asset protection planning tool for real estate holdings because it makes it very difficult for potential creditors to track down your holdings.  Frequently attorneys take cases on a contingency basis.  If the attorney cannot find any asset of value in your name, he is much less likely to want to pursue a lawsuit against you on this basis.  By establishing a veil of privacy around your assets, this frequently is enough of a deterrent to keep the wolves at bay.
2. Ease of transfer – Transferring a property held in trust is much easier than transferring a property you own in your own name.  The beneficial interest in a trust is considered personal property, not real property therfore you can assign your beneficial interest to another party without a formal closing.
3. Ease of control by multiple owners – If there are mulitple partners in a real estate investment, the owners can place the asset in the trust and assign themselves as beneficiaries.  Then only the trustee’s signature is required to execute documents as opposed to each and every beneficiary.
   
4. Comined with an LLC as trustee – If you use a properly structured LLC as the trustee, you have created an additional layer of privacy between you and the real estate asset.  The LLC, as trustee, effectively serves as property manager keeping all banking records in the name of the LLC as it relates to the property.  Additionally, you can also create a 2^nd LLC to use as beneficiary as an additional layer of asset protection if so desired.

With a properly developed asset protection plan using land trusts and an LLC, you remedy the investors two biggest dilemmas – huge exposure and ease of collection.

The land trust creates the veil of privacy around the assets making it virtually impossible for creditors to determine the beneficial owners of the real estate.  When backed up with the legal asset protection benefits of the properly structured LLC, you create a very cost effective, easily scalable, and bulletproof proof plan that is ideal for residential real estate investors.

If you are a real estate investor and would like to schedule a free 30 minute consultation to learn how we can help you properly structure your bulletproof asset protection plan, contact us today.

Regardless, I have several things to discuss with you so here goes.

The past week has been one of the busiest weeks of my life. We launched our new asset protection product, the Wealth Fortress Trust©, and haven’t even had time to put it up on the website. To be honest, I’m not sure I even want to list it on the site, due to privacy concerns.

It’s a very interesting hybrid product that I have never seen anywhere else. Due to the weaknesses of various other entities like FLP’s, LLC’s, corporations and trusts, we created this structure that combines the best attributes of all of the above without the weaknesses.

I have been completely overwhelmed by the number of emails and calls received since discussing this last week. If you have sent me an email or left a message, I will get back to you. Please be patient.

To answer some questions and summarize the highlights of the Wealth Fortress Trust©, here are a few of the details;
• It is a US based structure
• Offers complete anonymity
• Your name is not registered in any public record
• You retain complete control of the underlying asset
• Provides bulletproof asset protection from potential future creditors
• Low cost structure with minimal annual maintenance requirements
This product is perfect for;
• Investment real estate
• Segregation of your operating business from the real estate (if you own your building)
• Investment or trading accounts
• Large cash, or cash equivalent accounts
• Owing shares or membership interest of privately held companies
• Private investment partnerships
• High value business assets like equipment and machinery
If this appeals to you, please forward me an email with your name, number and your availability and we can schedule a call to discuss your asset protection needs.

In addition to this, I have been working diligently on producing the July issue of our EscapeWealth Ezine. We have partnered with EscapeArtist as the premiere portal for asset protection and financial information for expats or would-be expats.

We are very excited about this development and our new media partners involved. EscapeArtist has been around since the mid-90s and the site attracts over 15 million unique visits per year. We also have a subscriber database of 400,000 readers who receive our monthly Ezine.

If any of you work in the asset protection or financial arena and would like to tap into this very specific niche, please drop me an email and we can schedule a call to discuss options.

As a side note here, please do not contact me if you are only interested in blasting sales copy out to our 400,000 subscribers. I will only accept partners who are willing to provide real value to our readers. None of us need any more spam in our email box.

In the news today (July 13), Bernanke announced he may launch a new round of stimulus. Is anyone really surprised by this? I know I am not. It is only a matter of time.

The supply of dollars has more than doubled over the past 3 years and yet unemployment is still climbing. Interest rates are at all time lows, yet new and existing home sales are in the gutter. None of these attempts to control a market economy will ever work in the long run.

It seems the only ones benefiting from this stimulus measures are big business, aka friends of government. I would advise you to tread lightly with your investments and keep in mind who it is that’s pulling the puppet strings when you are allocating funds.

The US policymakers are still playing by the Keynesian rulebook of economics. Ironically Keynes was a big supporter of communist ideals like central planning. Keynes even praised Lenin for his 5 year plan.

Communism has proven over and over again that it just doesn’t work. Yet our policymakers still continue to play by his rulebook. As Einstein noted, “the definition of insanity is doing the same thing over and over again expecting different results”.

Who are the insane ones now? The politicians or the ones that keep voting them in office…

On a lighter note, I have been reading an amazing book I would encourage each of you to check out. It is Beyond Wealth: The Road Map to a Rich Life by Alexander Green.

I don’t recommend books often, but this one certainly deserves a look. Alexander is the investment director of The Oxford Club. He has been writing investment research for many years and has a tremendous track record.

More importantly, he has found balance in his life and understands what is truly important. The book is a compilation of essays he has written over the years and pulls wisdom from great minds throughout history.

I’ve even had my 11 year old son read this book (of course he has also read The Fountainhead and Atlas Shrugged by Ayn Rand). If you are a reader (and everyone should be), give it a look.

This subject is near and dear to my heart because this was the catalyst that got me into this business. As a lifelong entrepreneur, I have started, bought and sold several businesses over the years in several niches.

In my opinion, two of the most dangerous industries from a litigation perspective are real estate and restaurants. I have done both. Actually, I have done both simultaneously which is what prompted my interest in asset protection planning.

About 10 or so years ago I owned 2 separate, but related businesses. One company was a service company that provided home installation of products like fitness equipment, indoor game equipment, and outdoor play equipment. The company had service providers in about 18,000 zip codes (there are about 27,000 zip codes in the US).

The other company owned and rented real estate. Like many other small business owners, this started because I wanted to own the property where my other business was housed, so I bought the building. Then I bought another. And another. And so on.

Like every other self respecting 20 something business mogul, I also wanted to realize the ultimate dream of owning a bar.

So I bought one. It was actually a bar and grill across the street from a college campus so we did serve food, but ultimately, it was a bar.

As many of you may already be aware, running a restaurant is hard. And very time consuming. I had a partner, but he also had another business so the both of us were not able to devote the time it takes to be successful at this venture.

We did ok, made a few bucks and sold it a year later for 50% more than what we paid. In the process of selling, I began to think about shielding my other assets from any potential litigation that may arise from the risky endeavor of owning a bar.

During this time, I learned a lot about asset protection planning. While this stuff is intuitive to me now, at the time it was a revelation to learn what you can do to create a veil of privacy around your assets while keeping them legally disconnected from the rest of your business interests.
• I learned that you never, ever want to own any significant asset in your own name.
• I learned that you always want to segregate valuable assets into separate entities to limit the liability to that one asset.
• I learned how to legally eliminate equity in my real estate holdings to make them appear unattractive to creditors while still retaining that equity position through other entities.
• I learned how to limit my liability for each asset to a nominal value thus keeping my other assets safe from any predatory creditor.
• I learned how to make my assets invisible to prying eyes.
It’s a good thing I took the time to learn this stuff and implement my own asset protection plan too.

One year after we sold the restaurant, we were served papers by the local sheriff. We were being sued by the landlord of the property for failure to pay rent.

It seems that the landlord kept us on the personal guarantee for the commercial lease for the remaining 4 years and the party that bought our business defaulted on their lease just a few months after taking over.

We were being sued for about 3.5 years of monthly lease payments plus interest and penalties.

We were also being sued by the girls that bought the restaurant for misrepresentation of the business. They claim we lied about the revenue and the potential for the business.

Of course this was complete bullshit, but it didn’t stop them from finding a parasitic lawyer willing to take their case. They were suing us for the purchase price of the business, all of their monthly rents and expenses during their ownership, their loss of income based on what they thought they were worth professionally, and legal fees, plus interest.

Ultimately, we were being sued because we were perceived to be wealthy. Plain and simple. The landlord saw that we were the deeper pockets and the parasitic lawyers thought they had a payday.

Luckily for me, the asset protection plan I had developed worked like magic.

In the due diligence phase, the landlord’s attorneys could not find any assets that we legally owned so they offered a settlement. The settlement was negotiated down to about 10% of the original amount.

The lawyer for the girls who bought our business couldn’t find any assets either so he went back to his client and told them that he was not willing to take the case on contingency (commission) as originally offered and would need a large retainer (I don’t know the amount) to take the case. Since the girls had no money, they were forced to drop the case.

Restaurants are risky business. Potential creditors can come in many forms;
• Landlord
• Anyone who is on the premises either inside the building or in the parking lot
• Anyone who drinks alcohol at your establishment can have a claim based on your decision to potentially over serve
• Injuries from fights at the bar
• ABC board (agency that regulates alcohol purchases in some states)
• And the list goes on and on
These are just ‘inside creditors’, or potential liabilities that arise from the activity of your business.

There are also ‘outside creditors’, or potential liabilities making claims to the profits of your business from your personal activities. Most people think that by placing their restaurant inside a corporation, they are completely shielded.

This is incorrect. The shares of your company are an easy target for outside creditors just as like your shares of public companies like Walmart or GE. With your company shares at risk, a creditor can end up as your business partner or even owning your company outright giving him or her the right to liquidate the business to satisfy their claim.

There are many options when creating an asset protection plan for your restaurant business. There is no one size fits all approach.

Of course I am talking about Barry O’s State of the Destruction Address. On a superficial level, it made us all feel really good. That is unless we are thinking humans and realize that he was promoting bigger government and explaining to us all how it has created everything good in life.

It sounds really nice when he says he is putting a 5 year freeze on all discretionary government spending. Of course it loses a bit of its luster when you consider this has the impact of 1/10 of 1% of all government spending. It also sounds nice when he talks about lowering corporate tax rates and simplifying the tax code, until you realize the White House is in gridlock mode with Republicans controlling the house and Democrats controlling the Senate and White House.

Ok, ok, I said I wouldn’t overburden you with my musings of fictional TV. I want to do my best to offer you something of value since we know nothing of value is going to come from Washington.

Over the past 2 weeks, I have had a several interesting calls from various real estate investors. Currently we are drafting asset protection plans for a couple of them. With such an uptick in calls from real estate investors, I thought I would discuss some tactics available to minimize your investment and personal risk.

Take the following simple scenario:

Joe runs a pretty basic business. He owns three rental houses and self-manages them. He accumulates profits that sit in his cash account and his equity investment portfolio. Do you see any problems here? I do.

1. Never own significant assets in your own name
2. Never group significant assets under the same ownership structure

Why is this a problem? Imagine if the tenant in rental house 2 is injured at the property and is permanently disabled. This person’s attorney can easily determine your assets and will likely be willing to take the case on a contingency basis. Once the attorney easily defeats you in court he can execute a judgment and seize some or all of your assets leaving you penniless.

Let’s restructure Joe’s assets to minimize his risk:

With this structure in place, Joe has taken several steps to minimize his risk:

1. Joe no longer personally owns anything, making it difficult to verify asset ownership
2. Joe has segregated his real estate holdings from his liquid assets
3. Joe has implemented an estate planning tool by having the living trust own the LLC’s

Please keep in mind; this is a very basic structure for a very basic asset picture. By implementing this simple strategy, Joe has created ‘sleep at night’ insurance.

Joe could also further improve the asset protection plan by forming 3 separate LLC’s – one for each rental house. He could also put each rental house in a land trust and name his LLC as the beneficiary. As you can see, there are a multitude of options for creating an effective asset protection plan for the investor.

Some items to make special note of: By having no assets titled in Joe’s name, many plaintiff attorneys will come up empty handed when doing an asset search. Most attorneys will not take a contingency case and will require the plaintiff to provide a significant retainer. This is deterrent enough in many cases.

Even if the case is pursued beyond the insurance payout, the plaintiff will only be able to attach the property and the assets of the LLC itself which shields the remainder of Joe’s assets. This means Joe gets to live to fight another day.

As Joe’s real estate portfolio grows, he would want to add more LLC’s for property ownership and likely would want to form an S-corporation for the property management business, further segregating the assets and minimizing the risk.

If you are a real estate investor and would like to investigate your asset protection options, call today for your free 30 minute consultation. Until next week, live well.

When it comes to asset protection the majority of attention is given to investment real estate with scant advice on how to protect a personal residence. If you are fortunate to live in a state that offers a larger or all-inclusive homestead exemption, this is not a concern. For everyone else the picture is less clear.

Most attorneys and insurance agents will advise you to carry an umbrella policy and not to worry. This thinking is naïve and not representative of how insurance companies view claims; deny, deny, deny, then, pay if forced.

Of course the assumption here is that the claim you now face is covered under your policy. For example, contract disputes, defaults, environmental claims and bankruptcy are just a few of the items insurance will not cover. What to do, you may ask…

Last week I received a call from a woman in California. Let’s call her Susan. Susan owned several rental properties in the Southern CA region and due to the housing crisis; she is upside down in all of her houses, except one – her residence.

To be clear here, I am not trying to justify her financial acumen or skill as an investor, only using this as an example for the sake of the rest of you who may want to consider asset protection planning as it relates to your home. Susan had refinanced her investment properties over the past 3 years to pull cash out to satisfy some unrelated debt leaving here with very little equity in the houses.

Of course as we are all well aware, housing prices plummeted over the past 3 years leaving her with negative equity in all properties, except her personal residence. Susan was trying to renegotiate with her lenders to reevaluate the terms of the mortgage and in some cases short sale the properties.

Once the lenders discovered through their own due diligence that Susan had significant equity in her personal residence, the banks shut the door on negotiations. They are pursuing her personally for deficiency judgments and seeking foreclosure of her home to satisfy them.

As you can imagine, the umbrella policy her attorney and insurance agent recommended offer no comfort at this time. Now Susan is looking at foreclosure of all properties, including her home.

I would love to say we solved her problem and found a way for her to keep her home, but alas, it was too late. She missed the boat. You don’t buy car insurance at the scene of the accident.

Susan’s problem could have easily been solved if she had taken any one of the following actions to protect the equity in her personal residence several years ago.

Home Equity Line of Credit -

Susan could have applied for a home equity line of credit with a bank different from those that held her investment loans. When taking out a line of credit the lender would secure the credit line against the equity in the residence via a deed of trust. She could have made her home appear encumbered making it unattractive to an aggressive creditor.

Friendly Line of Credit (also called Equity Stripping) -

The friendly line of credit is the same as the home equity line in principal with one exception – your entity will serve as the bank. In today’s lending environment lenders are reluctant to provide more than 75% on home equity lines if at all. So, a convenient workaround involves creating an LLC in Nevada that provides anonymity of control and ownership. After you create the anonymous entity, you direct your company to enter into an equity line with yourself whereupon you provide the equity in your personal residence as collateral, i.e., your entity will record a deed of trust against your residence for any amount you deem necessary to protect your equity.

The great thing about this strategy is you are in full control of the credit line so you can increase and/or release it at any time. From the aggressive creditor’s point of view you have borrowed money from a Nevada entity that holds an equity position in your home.

Qualified Personal Residence Trust – “QPRT”

Just as the name implies, this trust is set up to hold your personal residence. The QPRT is mainly thought of as an estate-planning tool. It works as follows: the owner of a personal residence transfers it to a trust, but retains the right to live in the residence for a specified period of years. At the end of that time period, the heirs become the owners of the residence. Thereafter, the residence will no longer be a part of the former owner’s taxable estate. An ancillary benefit missed by most attorneys is that by placing the residence in trust it is removed beyond the reach of the homeowner’s creditors.

These are just a few of the strategies I use to help my clients’ protect one of their most important investments from the threat of attachment. Like all planning, starting early before the hounds are at your doorstep is of utmost importance.

Call today for your free 30 minute consultation. Until next week, live well.

In my travels, I make it a point to meet as many successful business owners and investors as possible.  And this trip was no different.  I am always asked by friends and family if my travels are for business and pleasure, and for the most part the answer is both.  Rarely do I travel without meeting other like minded people but because I love what I do, it is always a pleasure.

My firm’s objective is to help business owners and investors accumulate and preserve wealth not only for their own enjoyment, but for general economic growth.  Our belief is that through pure capitalism, the world prospers.

I know this seems a bit like “blue sky” goals, but my firm has a commitment to help clients maximize wealth accumulation and minimize risk in their portfolio of assets.

There are several threats to your wealth including, but not limited to, litigation, taxation, political agendas, and government seizure of assets.  If you are an American entrepreneur with your business, banking, investments, real estate, citizenship and residency in America, you have put all your eggs in one basket and overexposed to severe risk.

Any competent investment advisor will tell you that diversification it critical to mitigating your risk and maximizing your profit.  As an asset protection specialist, I can tell you that diversification is even more important with you total portfolio of assets.

Most of you have assets that fall in one or more of the following categories:

• Cash
• Personal real estate
• Investment real estate
• Private businesses
• Stock holdings
• Bold holdings
• Precious metals
• Intellectual property
• Art and collectibles
• Private placement debt holdings

Today I want to address what I feel is your number one risk point with your largest asset; litigation in regards to your real estate.

How many of you own personal real estate in your personal name?  What about investment real estate held in your name?

If the answer to either of those is yes, you need to make some changes.  In the ‘Great Reset’ we will see growth in litigation.  There are already 1.2m practicing attorneys in the US and nearly 70% of all lawsuits filed each year worldwide are in the US.  This is unlikely to decline with a growing trend of entitlement mentality and people seeking ‘wealth through litigation’.

If you own real estate deeded in your name, you should just print a t-shirt that says, “I’m rich, sue me”.  Make sure it is white with a red bulls-eye.

Certainly to some of you this is preaching to the choir.  But I will tell you that I speak with clients weekly who have large real estate holdings deeded in their name.

If you are ever sued for any reason, the plaintiff’s attorney will do a document search on you to find out his payday.  By having your name on the deed, it is very easy for him to not only find your assets, but                   attach them as well.

Of course some of you may be thinking, “I only have a rental house (or 2, or 3), this asset protection thing is just for the super wealthy”.  Ask yourself this question, “Can you afford to lose everything you have?”  Because you never know when your next tenant is going to put a meth lab in the basement of your rental house and blow it up causing death or injury to some innocent bystander.

Of course that may sound extreme, but it could be something as simple as the tenant or their guest getting injured at the rental house.  They will likely go back to the property owner as you will be perceived as the deep pocket.

In this scenario, not only is the house at risk, but so is any other asset you own as well as your income stream.  Do you feel comfortable with that kind of risk?

Proper asset protection planning can offer you privacy, litigation protection, estate planning and possible tax savings.  There are even ways to make the property completely unattractive to your potential creditors as well.

I spoke with a British man in Zurich about a property he owns in California.  The home was worth a considerable amount of money and using a family limited partnership and a trust, I showed him how he can completely eliminate his litigation risk, make the property invisible and unattractive to creditors, as well as virtually eliminating his estate tax burden (as it relates to this property).  Does this sound appealing to any of you?

If so, call today for your free 30 minute consultation.  You can also click here to subscribe to our free weekly newsletter.  Until next week, live well.

The Limited Liability Company, or LLC, traces its roots back to the German law of 1892 authorizing Gesellschaft mit beschrankter Haftung, or GmbH.  Once established in Germany, other countries from all around the world followed suit.  In 1977, Wyoming became the first US state to enact a true LLC act modeled closely after the 1892 German GmbH code.  Today, LLC’s, or the local variation thereof, are the most widely used form of business ownership around the world.  They are also the most widely misused.

Most entrepreneurs take great care in starting their company, but forget about the dual nature of asset protection and therefore neglect to properly structure their LLC.  Not only do you want to protect your personal assets from the activity of the business, you also want to protect the business, and thus your income, from your personal activities.

This is where a properly structured LLC comes into play.  If you are registering an LLC in the US to conduct business and/or to own assets there are the 3 main considerations;

• Register in a state that only allows creditors a charging order as the sole remedy by statute
• Register in a state that allows anonymous managers, or at least use a nominee manager
• Make sure you have a rock solid operating agreement

Step one is to register the LLC in a state where a charging order by statute is the sole remedy for a creditor to collect distributions from an LLC.   There are several states that only allow creditors a charging order as the sole remedy, but not all of those states are a good choice due to other factors like excise taxes or capital values tax.  Due to the nature of the charging order (in the proper state), creditors are only entitled to distributions, but cannot force a distribution, take ownership of assets, foreclose on business assets, or be granted membership interest in the LLC.  This means if your assets are held in a properly structured LLC, your creditor can only gain rights to your distributions, but as manager, you can elect to withhold distributions to member(s) leaving your creditor with a tax liability.  In some states, like CA, creditors can foreclose on business assets held in an LLC or even be granted a membership interest allowing them to gain control over the assets.  You don’t want to register in those states.

Step two should be to register your LLC in a state that allows anonymous managers, or at least utilize a nominee manager.  In most cases this veil of privacy is enough to keep the wolves at bay.  Imagine getting into a car crash.  Nowadays the first reaction of the ‘victim’ is the grab their neck or back and claim an injury.  Of course their attorney will run a public record search for your assets to determine his ‘payday’.  If there is no fat piggy bank to smash, in most cases he will not pursue you beyond the limits of your insurance.  By simply making your assets invisible to public record searches, this puts up a significant roadblock.

And step three is to make sure your operating agreement is rock solid.  Last week I discussed the operating agreement and what constitutes a good one (if you didn’t receive last week’s newsletter, feel free to send an email requesting the April 22 issue).  I can’t tell you how many entrepreneurs that cross my path who either have no operating agreement all, or the one they do have is so inadequate, they might as well not have one.  At least 90% of the operating agreements we review for clients are completely useless.  Most are 7-10 page boilerplate agreements that offer no asset protection whatsoever.  That is just not enough space to spell out a contractual obligation.  Ours is approximately 70 pages.  The operating agreement is the contract between you and your business and is the first thing the court requires for guidance in dealing with your assets.  In the absence of a good contract, you are at the mercy of the court should you find yourself to be a defendant.

With proper asset protection planning, the LLC can be a very useful tool in minimizing your risk.  There are many creative ways to use LLC’s for structuring your assets like using a Nevis LLC to own your domestic LLC thereby giving you an additional layer of protection and making your assets completely invisible.  You can also use a combination of LLC’s to segregate business assets or strip equity from real estate using liens that you control.  If you have any questions or would like to schedule your free 30 minute consultation, feel free to contact me either by email or phone.

Real estate and precious metals are the exception here. By holding real estate or precious metals outside of the US, this gives you significant asset protection from creditors and government intervention.   To be clear though, for US citizens or residents, all worldwide income must be reported and is taxable regardless of where you live.  So if you own a beach house on the coast of Spain and rent it out for holiday, you must report the income. 

I have been recently acquainted with a man in Costa Rica who is developing a very interesting wellness resort and spa on 83 acres of forest surrounded by protected areas and a national park.  He has already built several residences, a wellness spa, a bed and breakfast, and will soon be opening several restaurants and a medical facility.  This is a great opportunity for someone looking to retire, have a second home, go on a vacation, or take advantage of investment opportunities.  Hugo, the owner, is looking for business partners to develop additional amenities like a hotel and restaurants.  With certain qualifications, Hugo has even offered to pay for your trip to check the place out.

At this point I have not visited Hugo’s place in Costa Rica.  I have read though his investment offering and I have looked extensively at his business plan.  It is very appealing.  I will be making a trip there later this year to put my boots on the ground.  I would encourage any of you that may have some interest to at least check it out.  Do your due diligence.  Hugo is even willing to pay for your  plane ticket.

Buying real estate outside of the US is a great way to hold assets and minimize your US holdings while diversifying at the same time.  As stated in previous newsletters, this is not for everyone.  If you are a small investor or business owner and uncomfortable with offshore holdings, you should just disregard this.  But for many of you reading this, you already have a vacation house, or are considering buying one, liquid investments like securities, business holdings, and are interested in ways to diversify your holdings while giving you options.  You are the ones who would benefit.

If you want to contact Hugo, please send me an email and I will forward you his contact details.  If you have further questions or would like to schedule a free 30 minute consultation, you can contact me by phone or email.  Live well.

Hugo is an interesting guy.  He holds a BS in Computer Science, a JD in General Law, an LLM in International Taxation, a Doctorate in Taxation, a Doctorate in Naturopathy, former CFP, and has traveled to over 100 countries.  Needless to say, he is experienced in international business. 

Recently I heard from Hugo.  Hugo is developing a Wellness Resort and Spa in Costa Rica near the Pan American Highway.  It is surrounded by huge national park and a wildlife refuge.  It is a very interesting concept with medical facilities, spa, hotel, bed and breakfast, and several restaurants.  And right now, Hugo is selling ten of these beautiful lakefront houses for $40,000.

To put the icing on the cake, Hugo has arranged easy, low cost financing for those able to put 30% down.  There will also be property management available for those interested in using this as an income property.  For the entrepreneurs, Hugo is looking for partners for the medical ventures and additional restaurants.  For anyone interested in an absolute bargain in a beautiful location, this deserves serious consideration. 

If you are interested, please send me an email and I will connect you directly with Hugo.  Live well.