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Ten Rules for Asset Protection Planning

Asset Protection Rule #1: Have it in place before you need it
Asset Protection Rule #2: Plan ahead
Asset Protection Rule #3: Asset Protection is not Insurance
Asset Protection Rule #4: Business Assets or Personal Assets
Asset Protection Rule #5: Don't confuse control with your alter ego
Asset Protection Rule #6: This isn't Tax & Estate Planning
Asset Protection Rule #7: Avoid a repatriation order
Asset Protection Rule #8: Watch for provisions in the bankruptcy code
Asset Protection Rule #9: K.I.S.S. (Keep it simple stupid)
Asset Protection Rule #10: Full disclosure

There are several benefits to using a trust for asset protection. 

Trust Benefit #1: Privacy of Ownership

The privacy of ownership is important. You may have heard of living trusts. Typically, when attorneys create a living trust for you it’s called “Your Name Living Trust” or “Your Name Family Trust.” Is there any privacy there? Absolutely none at all.

But with a Land Trust, you can name the trust anything you choose. Like the “Sister Mary Francis Trust.” Now it appears the trust is owned by the nuns. Who wants to sue the nuns? How about the “Native American Youth Trust?” Does anybody want to fool with the Indians? How about the “Children with Special Needs Trust?” Do you have any kids? They’ve all got special needs, don’t they?

Do you see my point? The name throws them off the scent.

Using these trusts will put us in a position to control assets in a name other than our own.

 


 

The Benefits of Using a Trust to Protect Your Assets

Trust Benefit #1: Privacy of ownership

You may have heard of living trusts. Typically, when attorneys create a living trust for you it’s called “Your Name Living Trust” or “Your Name Family Trust.” Is there any privacy there? Absolutely none at all.

But with a Land Trust, you can name the trust anything you choose. Like the “Sister Mary Francis Trust.” Now it appears the trust is owned by the nuns. Who wants to sue the nuns? How about the “Native American Youth Trust?” Does anybody want to fool with the Indians? How about the “Children with Special Needs Trust?” Do you have any kids? They’ve all got special needs, don’t they?

Do you see my point? The name throws them off the scent.

Using these trusts will put us in a position to control assets in a name other than our own.

Trust Benefit #2: Beneficiary's Name is Kept Private
One of the biggest benefits of trusts is that the beneficiary’s name is kept private. Nobody knows who the beneficiary is, except in Pennsylvania and Arizona, and even there I’ve got solutions to that problem.
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Trust Benefit #3: Transactional Privacy

With these trusts you can do hundreds of deals and no one knows that you’ve done any business because nothing’s in your name. Nobody can see what kind of activity you have. How do you like that benefit? Even if you do all of your purchases in an LLC or a Corporation you are still at risk. Oh, I don’t mean you… I mean just everything owned by the LLC or Corporation! You see, if that attorney I mentioned earlier sues the property owner, who happens to be a Corporation or LLC, then the judgment goes against that entity with all your stuff in it! You could be safe personally, but all your assets could be lost. It would be far better if that entity were actually the beneficiary of a trust. And no one would ever know that it has all these assets because they are beneficial shares of trusts, which are not on any public record.

And for goodness sake, keep your mouth shut about what you own. The only people you should brag to about your brilliance in real estate are other people who are in the real estate business. You never brag to your tenants. Shhhh!

Trust Benefit #4: Government has limited control
What about housing codes? One of the things housing code enforcement officers love to do is to look up the other properties you have and go inspect those properties as well. And BOOM! They make lists of everything wrong with everything else you’ve got. Ah-ha! When your property is in individual Land Trusts, they can’t find you. They can’t connect the dots on all the properties you own.
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Trust Benefit #5: No relationship with state government

Corporations, LLCs, and Limited Partnerships are creatures of the state. The state gave them life. Therefore, the state has control over their operation within the state. They can require annual dues, annual fees, and annual tax returns. I told you earlier they could charge these entities annual fees. For example: $300 in Maryland, and $800 in California, per entity, per year! State governments are always looking for ways to create more profit centers that don’t obviously affect voters’ pockets or risk losing votes. So they look for ways to tax business people instead. State created entities can cost a lot of money to operate.

What if you were brilliant enough to listen to your attorney who had you put all your properties in those LLCs, each one in a different LLC, and then they come along one day and pass a law that says $800 per year per entity? You just had a bad day, didn’t you?

They can’t do that with trusts! Trusts have no relationship with State Government. They can’t tax trusts within its boundaries because in the Constitution of The United States, Article 1; Section 10 states that no state shall pass a law “impairing the Obligation of Contracts.”

A trust is a contract between a trustee and a beneficiary and no one else. Is that a good thing? Yeah Baby! Government has limited control; in fact, there’s no relationship to state government. Now, do you believe this trust concept provides asset protection?

But it doesn’t stop there.

Trust Benefit #6: Land Trusts convert real estate interests into Personal Property

One of the unique benefits of a land trust is that it converts real estate into personal property interests. Land trust interests — beneficial shares — become personal property. Aah-Haa! When they become personal property interests, what can we do now? We can have them held by another type of trust called a Personal Property Trust. In other words, the beneficial interest of the land trust can be held in a Personal Property Trust.

By the way, you can also use these personal property trusts for vehicles, for stocks, bonds, mutual funds, bank accounts, CDs, Sea-Doos, mobile homes, motor homes, gun collections, coin collections. Everything else in your life goes into personal property trusts. Each asset should have its own trust to further protect it.

To make this easy, I give you these trusts on a computer disk in Street Smart® System Volume 4 “Land Trusts” and Volume 5 “Personal Property Trusts.” That way, every time you acquire another asset, you push print and you’ve got another trust to place it into. Press print, you’ve got another trust… press print, you’ve got another trust… press print, you’ve got another trust! No attorneys to pay!

You don’t have to pay an attorney to create each one of these trusts because it’s already created — with tried and true documents! Just press print, and you’ve got another trust. Doesn’t that make sense? This alone will save you a fortune.

Now, when they come a-knockin’, you don’t own anything. Meanwhile, you have the use of a lot of things. In fact, you may even lease the vehicle that you’re driving. Who do you lease it from? The trust that owns it. Or you could be an authorized driver for the Trust.

How about if you lease the computer you use from the trust that owns it? And if anyone wants to collect a judgment against you, guess what? What do you own? Nothing. The computer you use is owned by a Trust.

How do you like this plan so far? Each property goes into a separate Trust. Vehicles go into separate Trusts. Bank accounts in a separate Trust. Stocks in a separate Trust.

Thieves can’t see what you own. Sounds pretty good, doesn’t it?

So we can take the land trust and create a second trust, a personal property trust with a different trustee than the land trust. Then if somebody sues, you get to hang out behind the scenes and just watch what’s going on. At this point, you are two steps removed from the property.

Protection Alert: The beneficiary of a trust can be another trust.

They can sue. They can do anything they want to. Then you can decide what to do. Do you like this plan? Next question. Who’s the beneficiary of the personal property trust? Could it be an LLC? What else? Could it be yourself, or your kids? Who else? Or what else? Yet another trust? No problem. Press print, you’ve got another trust… press print, you’ve got another trust.

Trust Benefit #7: Be the Manager, not the Owner

What about the management of the property? If you are the manager, rents and other income will be paid to you “as agent.” As an agent for whom? The trust. How did you become the agent for the trust? The trustee hires you under a specially designed “Management Agreement for Trust Real Estate.” It’s all right there in my system. So now you, as the manager, have the right under that agreement to go to court, to evict, to do anything related to the property. Does this sound like a plan? But…

Where do we deposit the rents and other income checks?

But where do we deposit the rents and other income checks?

Into a trust bank account. It is not related to any of the other trusts. It’s a different trust. It’s a personal property trust. And that personal property trust opens a trust bank account. For this account, you’ll be the trustee. Wherever the money is, is where you are, but “as trustee” and not personally.

So rents are paid to you as an agent. You deposit them into the personal property trust bank account for which you are the trustee. You are not the trustee of the land trust, you are not the trustee of the personal property trust that holds the beneficial interest of the land trust, but you are the trustee of the bank account trust. And you are the signatory of the bank account. Next, we’re going to write checks from this bank account for the mortgage, the repair person, and any other bills, too.

Trust Benefit #8: It's difficult to collect judgments and liens
If somebody gets a big fat judgment against you, what do you own? Nothing. (You only own an interest in the avails and proceeds, which may flow from the trusts.)
Trust Benefit #9: Probate avoidance

This one ought to be at the top of the list. Having your assets (and your parents’ assets) held in trust prevents a process called “probate.”

Probate is a miserable thing! What is probate? Probate is the process by which the local government probate judge takes assets from the grasps of the dead and transfers it to the rightful living people.

The probate process can be very confusing, extremely long and very expensive. The estates of Marilyn Monroe, Elvis Presley and Howard Hughes (just to name a few) are still in probate… years after their deaths!

But, because you were smart enough to place your assets into trusts, then at your death, let’s say you’re the primary beneficiary… it all passes to your successor beneficiaries instantly. No probate necessary. The trustee already has the deed or title and passes it to your heirs according to the predetermined instructions in the trust, without ever going through the probate process.

Is that a good plan? It’s the only way to fly. Think of your parents as well. Your parents should transfer their assets into trusts so you don’t have to administer their estates through the probate maze. That’s why I give you audio CDs with my systems, so you can let your parents make the decision not to have their assets in their name anymore, and get them transferred into trust. Avoid confusion, frustration and cost! I extend a special license for you to use my system for your parents’ assets.

Why? To make your life easier! I’ve been through all this already. My step-father died in 1990 and my mom died in 1995, God rest her soul. Because we had taken this important step, everything was already in trust; I didn’t have anything to do after their deaths. You’ve heard about people running around forging signatures to get checks cashed after somebody’s death. If you’ll transfer everything into trust, you won’t have to worry about that, because the assets are already transferred, stored safely in trust. There’s even a trust bank account.

As I taught you earlier in the book, you’re going to make money when you have control and you’re going to lose money when you don’t have control. This system creates control even after death. It creates probate avoidance for your own property as well. You should want to avoid that whole process of probate because it’s an expensive, time-sucking process. In addition, the government requires you to pay them any taxes due within nine months of the death of the person who owned the property. So they force you, or a loved one, to run around and sell the property to people like me at huge discounts, because you’re trapped, and must pay the inheritance taxes, and don’t have the cash to pay them.

Trust Benefit #10: Division of Assets Prior to Death

You won’t have to worry about that for your family because we’re going to do something to solve this… a division of your assets prior to your death. Now that you know how and why to avoid probate, you can take a step that will eliminate the confusion, upset, and breakdown that most families with assets are faced with.

Most families use the outdated concept of transferring assets after death using a Will. In the interest of fairness, many parents just say, “Everything is to be sold and shared alike between the children.”

Well, that’s fine. But the problem is that all those years of work and toil will now be liquidated by someone who doesn’t know how to maximize the profits on each deal. What’s worse is all that steady income from the assets disappears. All the heirs get their hunk of money and spend it in a blink of an eye. They quickly forget what you gave them.

Personally, I think it’s a better advantage to the family to use the fact that each property has been placed in its own trust. While you can be the Primary Beneficiary of each trust, you can have different successor beneficiaries of each trust. This means that each asset goes to whomever you have listed as a successor beneficiary. It transfers instantly –– at the death of the primary beneficiary to the successor beneficiary –– by operation of law.

Now each beneficiary can make a conscious decision as to what to do with the asset(s) they receive independent of the others. Hopefully, they will keep it and the steady income that comes with it. Not to mention, the remainder of the inheritance gift they receive every month when the next check arrives. So, if you’ve got three kids and three houses, you can make each child the beneficiary of a different house. When you die they can each decide what to do with their inherited house, instead of having to split up everything and squabble over who gets what… you’ve already done that for them. Isn’t this a good plan?

Trust Benefit #11: No Separate Tax Return Needed

Another question I always get is, “What about taxes?” There’s no separate tax return as with other entities. Corporations, LLCs, limited partnerships, all have to file their own tax returns. Not a trust. Your CPA might get excited that you transferred all forty properties into individual trusts because he thinks he’s going to get to sell you forty tax returns. CPAs charge by the pound! So what do I have in my Trust System? I have a section called Taxes and the Land Trust. Now it’s not good old Lou telling you that you don’t need to file a tax return for each trust. How about the IRS? Will you take their word for it? Will your CPA? Right in the system, it includes the IRS’s details explaining why you don’t have to file separate tax returns for each trust. What the IRS says is all we’re concerned about. The beneficiary of the trust is the one who files the tax return. The beneficiary files the tax return, not the trust. How do you like that plan?

Yeah. No separate tax return. It’s the only way to fly! Yet another savings over using traditional entities…

Trust Benefit #12: Trusts give the ability to take title "Subject-To" an existing loan, safely

Now, just what does that mean? Earlier in the book I talked about buying properties “Subject-To” the existing loan. What was I talking about? Taking over someone else’s loan — in that person’s name — that they qualified for, and for which they paid the closing costs. We just come along with our skills, buy their property and take over making their payments. Is that a good plan? It’s a wonderful plan to build wealth. No more worrying about qualifying for loans. No more signing loans with personal recourse. No more banks!