Episode 183: Asset Protection - How to keep what you have?
In today’s show, Pancham interviews Brian Bradley – nationally recognized Asset Protection Attorney and Senior Managing Partner at Bradley Legal Corp.
With the goal of giving you the “peace of mind” knowing that your assets are far from harm, Brian Bradley has been defending high-risks professionals, entrepreneurs, real estate investors, and other workers from creditors that could target their assets and their wealth through asset protection!
How can you protect your assets? Listen to this episode as he deconstructs this concept and provides insights on how it really works! He’ll also go over the various asset protection trusts available and why you should start protecting your assets protected now!
Listen and enjoy the show!
Tune in to this show and enjoy!
- 2:11 – Pancham introduces Brian to the show
- 4:17 – The struggles he faced to be the leading asset protection lawyer today
- 8:51 – Asset protection and the ECCC criteria to keep in mind
- 11:18 – Analyzing what can potentially go wrong with no asset protection
- 16:38 – Breaking down the different layers of asset protection
- 27:32 – 2 asset protection trusts and what best fits for you
- 38:30 – Real-life case laws that apply the asset protection trusts
- 44:18 – The Bridge Trust and what makes it different from others
- 52:13 – Taking the Leap Round
- 52:13 – His favorite asset classes to invest on outside of Wall Street
- 52:53 – Overcoming his analysis paralysis and simply taking the leap
- 53:41 – Why fix-and-flip investments didn’t meet his preferences
- 54:29 – Why investors should always do their research
- 55:22 – How you can connect with Brian
3 Key Points:
- People tend to not get plans or protection as they believe that nothing wrong is going to happen. Having asset-protection helps you protect what you have before it gets any worse.
- The role of asset protection is to help create a legal barrier and out of your personal name so that the people who may be suing you can’t reach those assets.
- There are a lot of asset protection trusts that are made available to the public. You just need to find the right plan for you depending on your profile and your risks.
Get in Touch:
Welcome to the gold color investor podcast with your host Pancham Gupta. This podcast is dedicated to helping the high paid professionals to break out of the Wall Street investments and create multiple income streams. Here’s your host Pancham Gupta.
Hi, this is Tom Burns, author of why doctors don’t get rich. You’re listening to the gold collar investor podcast with Pancham Gupta.
Pancham Gupta: Welcome to The Gold Collar Investor Podcast. This is your host Pancham really appreciate you for tuning in today. Most of our adult life is spent working, you work hard to provide for your family, you build wealth, and you enjoy life. However, you spend very little time thinking about asset protection. That is how to keep what you have. Do you know that the US is the most litigious country in the world? We spend about 2.2% of gross domestic product that is GDP, roughly that is roughly $310 billion a year or about $1,000 for each person in the country on tort litigation, much higher than any other country. There was a survey done in the state of Louisiana and people were asked, what is the number one way to get rich? The top answer was winning a lottery. Do you know what the number two was? Yes, you guessed it right. By suing someone else who has money. You may think that this cannot happen to you and it’s very much possible that it won’t, but in my opinion, it does not harm to be prepared. As President JFK once said, the best time to repair a roof is when the sun is shining. So, unless you are 100% sure you and your family are covered. Do not miss the show. This may get you thinking about doing things that you always kept on delaying or never planned on doing at all. This week’s guest on the gold color investor podcast is an asset protection attorney Brian Bradley. A bit about Brian. Brian is the senior managing partner at Bradley legal Corp and is a leading educator and nationally recognized asset protection attorney for high-risk professionals and entrepreneurs, real estate investors and ultra-high net worth families. Collectively they’re protecting over $5 billion worth of assets. Brand’s goal is to give you peace of mind knowing your assets are safe, and they make it difficult for predatory lawyers to target vulnerable people. Brian was selected to the best attorneys of America list 2020 lawyers of distinction list three years in a row from 2018 through 2020 Super Lawyers rising star list 2021 and 2015 nominated to America’s top 100 high stake litigators list, and the top 100. In real estate, Brian also writes and teaches on advanced estate and strategic planning, and is a featured speaker at numerous investment summits, real estate, cash flow, finance and life coaching shows. Brian, welcome to the show.
Brian Bradley: Thanks, Pancham, for having me on. It’s an important topic that we’re going to be talking about, I’m going to try to keep it fun and not, you know, legally dense for your listeners here. And I’m not anyone’s attorney or legal guru, you know, we’re just going to be talking about generalities. And I think that we’re really going to learn a lot today. And I just hope that the concepts that we talked about help you and your listeners understand this area of law better and particularly breaking down asset protection, trust and trust.
Pancham Gupta: Yes, I’m absolutely excited about the shows. So, looking forward to it. I’ve discussed this many times. But you know, I think you bring a very good perspective, and you know, want to dive into that. So, before we get started, are you ready to fire up my listener to do better asset protection?
Brian Bradley: Yeah, I’m absolutely fired up, you know, smarter, firing up your listeners to take the proactive steps that they need to take to keep what they got.
Pancham Gupta: Yeah, awesome, man. So, tell our listeners about your brief background, and you know, how you got to where you are today?
Brian Bradley: so, I got into law practicing law as I was just an injured college athlete, trying to figure out where to channel my competitive streak. And my mom was like, hey, you should really you know, consider some philosophy classes, you know, it just sort of fits your personality. And so, I was taking philosophy classes, and one of the doctors were, you know, professors were going to a different school, and he’s trying to get me to go along with him and do a doctorate there with him and philosophy. And at the time, I was like, well, I don’t want to be a philosopher and I don’t want to be a teacher. Like I can read and write on my own. You know, it’s like, I want to make some money out of life. I need to figure that right out. So, you know, I decided did go to law school and came out of law school just at the wrong time when the economy like ’08, ’09, ’10, completely crashed. And so, I supposed to be getting hired as this next, you know, big time prosecutor, because I was working at the DA’s office for, you know, three years while I was going to law school and really high-profile cases. And then next thing, you know, my job offer got rescinded because there was no money to pay anybody. And so, I had to figure out what to do. Yeah, so I had to figure out what to do. And so, I just wanted to civil practice and was working, you know, bouncing around different private firms, and just throwing myself into a bunch of cases, and the economy trickled down into that. And I got let go from those firms. Because there’s again, no money, clients not even paying bills. And so, I just was like, I need to get into court. So, I just literally went to every state agency who was like, hey, I’ll represent your clients for free, just pay the upfront costs. So, for three years, I literally worked for free, just doing hundreds of trials. And you know, I was like, I just need to get in there, this will all pay off at some point down the road. And then from there, just working with different firms. After I had all that experience, I realized there’s too many people losing everything from all these frivolous and dumb lawsuits and just completely taking and destroying their lives, there has to be a better way to go about this to protect the investors. And I like investing myself, I like money. I like finances, I like taxes. I like the practice of law. And I realized, people need to start doing things beforehand, before they’re getting sued. So, what are those things they should be doing to avoid people like me, you know, when I was doing trials, and that transition my practice into asset protection, and then collaborating with the top asset protection attorneys in the nation. And then we just sort of created affiliation, partnerships and joint ventures together. And I took off from there and just started completely transitioning how I practice law and what my focus wasn’t combined up all my passions of practicing law plus money, finances, like I said, taxes into one practice area to where I’m actually passionate about what I do and teaching other attorneys how to do what we do. And that’s how I got into the world of asset protection.
Pancham Gupta: Wow, that’s a very, very interesting background there. And, you know, I love what you said that you are on the other side, and he saw how all these people were suffering, and you kind of found a solution, or started looking for a solution and have a solution for people to keep what they have right.
Brian Bradley: Now, as I said, a lot of it just comes from our own mindset, you know, we have a lot of misconceptions that we carry around with them, you know, and a few of them are just simply like, well, I don’t need to do anything, I’m a good person, and they forget to realize bad things happen to good people. And it goes to the whole reason of why most people do not create, you know, just like basic estate plans until it’s too late. And you know, you’re actually in the hospital or dead is because people don’t like to think about mortality, or their mortality or bad things happening to them until it’s too late. But the problem with asset protection is, it’s like trying to go get car insurance or house insurance after you have a car accident or your house burns down, this is not going to work, you’re not going to get the coverage. Same thing with asset protection planning or, you know, you think your insurance, I got an insurance and umbrella policy, like I’m good to go. And they don’t realize, well, there are these things called insurance, defense attorneys, and their whole job is to find ways to create legal wiggle room to not pay your claim, especially big ones. Or for some reason people misconstrue, you know, first word first letter limited, you know, Limited Liability Companies LLC, like, they don’t hide the fact that these are just limited their base layer protection levels. So, as you level up and layer up, you need to layer up your protection strategy as well, you’re going to grow that LLC. And when that LLC gets Pierce, then what? And that’s kind of the world that we work in is the then what, so we do more advanced asset protection, utilizing, you know, limited partnerships and asset protection trust and try to help you like I said, protect what you have before it’s needed.
Pancham Gupta: Yeah. So, Brian, I think that’s great. So, we’ll what we’ll do is I’m going to break this down for someone who’s listening or hearing this term for the very first time, right? And they’re like, you know, what? I have an insurance policy. And now this is something Yeah, and there’s something called asset protection trust. So very briefly, like what is asset protection?
Brian Bradley: That’s the perfect place to start, you know, like, what’s this weird mysterious word, right? It’s not traditional estate planning. It’s modern estate planning. And what we’re doing is placing a legal barrier between your assets and your potential creditors you know, the people suing you and trying to take your money before it’s needed and that’s the key word before it’s needed. It’s like a barrier like a safe for your gold or guns or valuables you know, anything of value. You want to put behind the legal barrier and out of your personal name so that it’s not easily attached with a lien or reached and so it’s just like the rich I love the Tony Robbins saying success leaves clues. The rich don’t own things in their personal names, their businesses and their trust. Do you know they just get the beneficial use and enjoyment out of them while separating out the liability? Have the sight of it. And so those are the things that you know, I think your listeners really want to keep in mind is just creating barriers. And when you’re shopping around for asset protection, I want you to keep this acronym in your mind ECCC effectiveness, cost control and compliance. And so at the end of the day, you want a plan that’s going to be effective, it needs to work when you want it to work, and not invite an attorney and someone wanting to pierce it costs, the costs need to be reasonable, depending on where you are on the scale of asset protection. If you’re just starting out, don’t ask for you know, like, for example, like a bridge trust, asset protection, trust, there’s no reason if you’re just starting out, you should be spending $30,000 To protect one piece of property, start an LLC and scale as you go. Compliance, the compliance if your CPA is going to have too hard of a time to figure out how to file taxes on it, or it’s going to be too much, you know, in the realm of maintenance and costs to comply with it, after a year or two, you’re just going to give up on it and then you’re not going to maintain the compliance and then it’s not going to be worth the money you spent. So, as you start, you know, developing and vetting what processes you’re setting up just a really think about that acronym, you know, effectiveness, cost control and compliance
Pancham Gupta: as great. So, effectiveness, cost control and compliance. That’s awesome. That acronym. So, I’m going to give you a scenario, which I think a lot of our listeners probably fall into. And let’s take that scenario. And we’ll build it up. Right. So, let’s say we have family, right? They don’t have high liability assets, like you know, rental properties and all that. Both husband wife, they have W2 jobs. They own their own house, one house, right? Some cars, some stocks, and they have a 401 K plan. Yeah. So, what can happen to them? And also, they have insurance policy, like you said, they have some umbrella insurance, and they have some regular insurance. So, let’s say one of them hit someone, and they were riding in a car, right? What can happen?
Brian Bradley: Well, I mean, you can lose your house and your personal stock account from there, because at the end of the day, we’re looking at your risk profile that you laid out, you don’t have really much risk, you have no risk, really, from your personal job, you’re a W2 employee, you don’t have any rental property. So, there’s no added risk there. So, the risk is realistically going to come from just a pure negligence of life. You know, like you said, like it’s date night, we’re going to go out and have a beer, a glass of wine, some schmuck walks in front of your car, and you hit on whether it’s your fault or not, now you’re going to be getting sued. So if I’m suing you we’re going to be looking at is, where’s the equity, where’s your money at, and it’s going to be most likely in your bank account is going to be the equity in your personal residence and is going to be in your personal brokerage accounts, your 401 K’s those type of ERISA protected accounts are exempt. So those are protected. Same thing with, you know, like traditional Ross Roth, different type of retirements that counts like those. They’re not a reset protected, but they have really strong state exemptions. And you generally would utilize those by declaring bankruptcy. But even almost every attorney is going to realize there’s an exemption status to that those types of non-ERISA protected accounts, it’s going to be too hard to try to go in pierce through an exemption. And I’ll give an example of an exemption where I think even if people don’t watch NFL football, they know who OJ Simpson is, you know, it’s just too big of a story to not but for those who just don’t, or for the recap it, OJ Simpson was a professional NFL football player who got charged with murdering his ex-wife and her boyfriend. Now he won the criminal case and found not guilty. But then the family sued him personally and they won a wrongful death claim against him. Now all his assets were held, like his Florida mansion, which was in, you know, as mentioned in Florida, has 100% exemption status on it. And then his rest of his money was through his NFL pension plan. And now those are exempt statuses, so the family was never able to collect on him on those assets at all. Yeah, yeah, because they’re exempt. So, you know, there’s nothing there to collect on. So, he was perfectly fine from that judgment, that just goes to the power of exemptions. But not all assets are exempt. And it’s really, you can’t really convert nonexempt assets to an exempt status. So, you know, in this situation, you have cash, cash is just sitting there at hand, you can’t move money after the fact like after you hit somebody with your car, because then that’s a fraudulent transfer. So in your situation, I would be suing you and I would be collecting on you from your house forcing you to sell your house to get the equity and then depending on how big the judgment is, the cash in your bank account, and if you have a personal brokerage account, that’s not an exempt status, so that would need to be protected as well. But since it’s not right now, in your hypothetical, I would be going after to make you sell your stocks and then collect on that same with cryptocurrencies.
Pancham Gupta: So, the order would be like none of this is protected. The order would be the low hanging fruit is your cash and your stock account right. And the house right Unless I add these three things, and if they are, what you’re saying is, in a nutshell, if they’re in a non-exempt status, which likely all these are for the profile I mentioned to you for these husband and wife, working W2 job, they will be protected, the first layer of defense would be the insurance umbrella insurance that they have. But then once that’s kind of like you said, the insurance company is going to have their own defense lawyer saying that, yeah, you were driving, and it was your fault. I don’t know, if they’re protected. That case or that limit will be breached at that time, depending on how much the judgment is for.
Brian Bradley: Exactly. And the great thing that you brought up there is, it doesn’t matter if it’s an umbrella policy or whatever. I think for some reason, people think umbrella policies are like a cover at all. Policy. And it’s like, it’s not it just provides more capital to fight. You know, it still has the same wiggle rooms and exit strategies of your other insurance, which means they don’t cover you for intentional wrongdoings or you know, gross negligence and wrongful acts, or intentional acts, and every single lawsuit that’s filed, there will eventually always be some allegation of an intentional wrongdoing. And that doesn’t mean like I intended to punch you in the face, or I intended to hit you in my car, it could be as simple as you sent an email you intended to type on your keyboard and you intended to click Send, like the plumbing was done. You know, for example, now a judge is going to say, well, that was an intentional act, because you sent that email, that email was an intent, and that now creates the legal wiggle room for the insurance providers to get out of covering, you know, that claim.
Pancham Gupta: Right, right. So, yeah, that’s great. So now we discuss like, what can potentially go wrong? Right, so let’s start with this again. Now someone who’s listening, they’re like, Okay, Ryan, awesome. Like, I know what I’m going to expose that where I’m exposed that so what do I need to do?
Brian Bradley: Yeah, so just, you know, I think so break down some key concepts and the tools that we use. So, we have different layers as we talk about asset protection. And the layers are really important, especially as you scale and grow your wealth. These tools are LLC, or the very base layer, and then a limited partnership, the second layer up kind of as a management company. And then asset protection trust, where you land in this scale is all going to depend on your risk profile, your net worth, what you own, where you own it, how you own it your day job. And I can break down each layer in more detail. But that first entry layer is your base layer, I want you to think about winter, okay, like I grew up in the mountains, I grew up in Lake Tahoe, lots of lots of cold, I worked in Michigan for a while freezing cold, I’m an Oregon, cold dampness. So, the one thing that we learn how to do out here is dress in layers, okay. And so that’s the importance of same principle of your asset protection plan, we want to layer them as you go. The first entry layer is your base layer, and it sits on your skin. This is an LLC, the limited liability company. This is when you’re just starting out investing in you have you know, zero to three units or properties, you know, with a net worth, generally at or below $250,000. And then as you grow, and you add more assets, and you hit that you know about four unit mark, or you’re investing in multiple states, like maybe you have a place in the Smoky Mountains in Tennessee, or you know, something in Ohio as well, and you’re creating, you know, multiple LLCs in different states. And your net worth is now around $500,000 or $700,000. Net, you want a mid-layer, which is usually a little bit thicker, you know, generally it’s going to be made out of Merino wool or for you ladies are current. Again, this is a management company, we use specifically a limited partnership for this mid layer, which I’ll break down if we have time, you know what that is. And then when you hit around $1 million net worth, you know, you want an outer shell waterproof layer. This keeps you nice and dry and warm when the weathers really bad. This is your doomsday lawsuit protection. This is your asset protection trust, or specifically, I like a hybrid trust that combines an offshore exit strategy that we just domesticate called a bridge trust. But that comes into play when you have about 1 million or more net plus, or a high-risk profession. You know, like you’re a lawyer, CPA influencer, you are a pure real estate investor, maybe a doctor surgeon, you know, one of these more high-risk professions, but by layering, you’re going to be now more flexible, and you can adjust to make yourself more comfortable. And so again, as you go through the different evaluations, just go back to remembering that acronym ECCC effectiveness, control cost and compliance and then where you fall on the sliding scale of needs. They’re just going to depend on your profile.
Pancham Gupta: So, Brian, like that’s great, right? Like I understand from your very first layer you said LLC then LP and then going to the outer shell I really liked the analogy that you gave and how you explained that. But going back to that example now like you know which I had the profile where the guys or a husband and wife don’t even have any rental property. Right. So, for them, and let’s say they’re at $1 million network mark, right? Yeah. And they don’t plan to have active investments. Yeah, they might be investing in syndications like passive investments. Right, but they don’t have anything of their own. So, what would you suggest for them, given that three layers that you had described, right base layer and the middle layer and the outer shell?
Brian Bradley: In that situation, it would depend on where that 1 million is spread out across. So, I want 1 million unprotected net assets is what we’re looking at.
Pancham Gupta: So, let’s say the house and the stocks and some bank account like you know,
Brian Bradley: and then I will be looking at the stocks and saying is the stocks in 401 K’s or is it in the personal brokerage account, because remember, what’s protected is already protected. So, if you have half a million in your personal home, and then another half a million and a 401k, well, your unprotected net worth is really only 500,000, because half of it is now exempt status in a 401k. So, when you talk to your attorneys realize, you know, at least a good one, what we’re doing when we’re doing a profile analysis, as I’m breaking down everything that you own, what status is it in, and what’s not protected through exemptions, or what we need to do. In your hypothetical, let’s just say like, it’s 500,000, in the personal home, 400,000 and the 401k, and then maybe 100, grand and a personal brokerage account, no real estate, active real estate and maybe one passive investment, they would probably realistically I would look at them and say you would need a limited partnership and a small version of an asset protection trust. And the reason is, you want to protect your personal brokerage account stock. So, if you have like $100,000 or more in that personal brokerage account, it’s still eligible to be claimed on so I’d want to assign that personal brokerage account out of your personal name and assign it into a limited partnership to protect it from a lawsuit. And then your personal house, that’s a lot of equity, and no one really wants to lose their home right when they’re getting sued. You don’t want to put your personal residence into an LLC or business entity because you don’t want to lose the tax benefits and credits that you get from homeownership and capital gains and all of that. So, the way you protect your personal residence without losing the benefits from the IRS of homeownership is you put them into an asset protection trust. Okay. And so, in that situation, that will kind of be the route with that client-based client profile that I would say is, you don’t need the LLC is because you don’t have any risky assets, your passive syndications can go directly into that management company because it’s passive. And so, you would just more likely need the limited partnership and a small version of an asset protection trust. So
Pancham Gupta: let’s break that down. Right. So, your house, you said that you will put it in asset protection trust. So now in that case, it’s not owned by you. It’s owned by the trust, correct? Could revocable trust, is that right? So, are you able to still claim as a personal home that particular house? Yeah, it
Brian Bradley: is your home, it’s your house, it’s just like the same analogy as if you transfer title of your home into your revocable family estate plan. Okay, you’re still going to get the same exemptions and same, the same benefits as home ownerships. Because it is a trust, okay, and there’s like the central means Act and the Trust Act, which means you’re not going to be giving up any of these rights. But to break down trust, I think, you know, to really understand like more about what trusts are, I think it’d be great to kind of say, like, not all flustered equal, they’re not all the same. And I can, if you want, I can break down kind of the difference between different types of trusts.
Pancham Gupta: Yeah, actually, before we get there, right, I just want to wrap this one up. So, you said the main house is in the asset protection trust, and then the stock account is moved into an LLC will be moved into a limited part limited partnership, right. And that’s it. And so, for that, they just have to call and it’s not a, you know, once you have that limited partnership, it’s not that difficult to just assign that, you know, just call your brokerage, and they will just assign it.
Brian Bradley: Correct. You know, and most of the brokerages, it’s literally just a document and assignment, like one page document that generally have some standard templates, and it’s just assigning it out of your name. Enter the name of your limited partnership, which you’re going to be the Managing Member of, and everything stays the same. You don’t need to sell all your stock and start Oh,
Pancham Gupta: yeah, so there’s no taxable event. That’s where I was getting to. Yeah, there’s
Brian Bradley: no taxable events on its correct. Okay. All right.
Pancham Gupta: So that was the home stock and for the personal bank account, what would you do there?
Brian Bradley: I like to see the bank account the personal bank accounts, depending on what your financial monthly expenses are like, everybody’s going to be different. I don’t like to see more than generally $25,000 added Time in a bank account. And some people like Oh, I like to have 100,000 in case there’s a rainy day, that’s great. There’s no one saying like, Don’t save for rainy days, no matter where we put it, don’t put it, leave it in your personal bank account, because then if you had one of those negligent events, and then you transfer it the next day after, like, God, I just got in a car accident. Now let’s move this money. Well, that’s now going to be going through the eyes and arguments of a fraudulent transfer, because you know, you’re going to get sued. And so, what I would say is create a bank account and that limited partnership and transfer the money into there now and just hold it in there. And then if you ever need it, just give yourself another disbursement and put it back into your personal account, then go use it, or go buy investment properties out of a limited partnership, whatever however you want to use the money, just don’t have it sitting there in your personal name, you might as well have it sitting there protected in case something negligent in your life
Pancham Gupta: did happen. Got it? So that transfers between limited partnership and into your personal account, if you want to use it, are they in any way need to be documented for tax purposes?
Brian Bradley: I would ledger it just so you know, like I would use a QuickBooks account or just ledger you know, it’s not gain double income coming in. This is just like my personal you know, your personal money that you know, you’re holding in there, just so it’s legit and documented out on what it actually like what the money actually is.
Pancham Gupta: Got it. So, it’s basically I’m just trying to get to anyone listening, that they have to do some kind of, yeah, it’s not like your personal bank account, it’s you still have to move the money to your personal account before you start using it right. Let’s say I’m going to go to Whole Foods and, or whatever, car dealership, buy a car, whatever, right? And so, okay, and what about cars?
Brian Bradley: Cars are assets, their liabilities, so I will just leave them out completely. Just think of them as like a big red moving object, you know, they depreciate what 25% The day you drive them off the lot, and all this is a risk that’s been driving going around. So, if it’s a collectible car, though, that’s different, you know, a car that appreciates in value, you know, put it into an LLC, you know, something like that. Same thing with not like yachts, you know, like, if you have an expensive boat, you know, or something like that, like that’s a lot of risk, put it into an LLC, on your little dinghy, you know, that you take out to go fishing. Like that’s a little exaggerated. You don’t need to; I wouldn’t recommend that. What if there’s an expensive boat? And yeah, like put those into an LLC, it was a collectible car that you have that appreciates in value, your car collector, put them into an LLC.
Pancham Gupta: Got it? Got it. Okay, cool. So now let’s move on to what you were saying like, you know, can you someone who’s never heard of asset protection trust, like, you know, what is it? And, like, break down that for us?
Brian Bradley: Yeah, absolutely. And I think I’m going to break them down through, you know, historical context and stories. And I want to break them down in three separate categories, kind of, you know, one, what are they two, there’s a different variety of them. There’s onshore offshore, and then there’s this hybrid that kind of combines both together. And I think that would give your listeners the best option of understanding like, what is this whole array of trust? How’s that,
Pancham Gupta: that’s great. And if you can use stories, that’d be great. And if you’re using too much, I’m going to put myself with the hat of someone listening. And I might stop your if
Brian Bradley: you want to jump in and ask questions. Absolutely. Because then otherwise, I can start lecturing. So yeah, so this is going to be your final layer, you know, it’s that true, full, bad, outer shell waterproof layer. And it’s that asset protection trust, it’s going to be at the end of the day, the heart and soul of the system that you create. And then just remember that trusts have been the longest lasting entities of all entities for holding assets. And when it’s done, right, they’re very strong, and they can be sculpted to fit how you need them. And they can morph as you need them without needing, you know, dealing with funding issues that you generally see with LLCs and other business entities that then get them pierced by an improper funding and use. So, I just love trust, and then having trust at the very top of your planning is just very powerful. And this is where creating an asset protection, trust, and more importantly, picking the proper jurisdiction really comes into play. And so, think of it like Baskin Robbins, you know, the ice cream company, you know, trust come in lots of different flavors and types. The standard 101 trust that everybody’s familiar with from the 60s is that family revocable living trust, not that you mentioned earlier, trust don’t die. So, when you do, and you actually funded your trust by transferring ownership and title into it. You don’t have to go through the courts and probate, and it just completely changed the landscape of estate planning. Then you also have things called Land Trust, you know that you put real estate in, and you can hold your land, you know, and you connect them to LLCs. But land trusts don’t have any protection in and of themselves. They’re only as strong as the LLC that you connect them to too, and so they’re just a privacy mechanism. They’re not an actual protection mechanism. Okay. And then from there, you have higher levels of trust that are called asset protection trust. And I really want to spend time with this and break down those three types. And after this, you’ll know more than I always say, 99% of attorneys out there about asset protection trust. And so, these really came into play in the early 1980s. Specifically, I think it was 1984. And asset protection trust is what’s called a self-settled spendthrift trust. And so, all self-settled means is that they are created for yourself. So, they’re for you, by you, as your own beneficiary, and they have the very important spendthrift provisions in them. This lets you protect your assets while you’re actually living from creditors and not having to relinquish control of your assets, the differences they allow you to protect your assets, not just for your grandkids, but for yourself, which you weren’t allowed to do in the past. And then you’re probably somewhat familiar with another type of self-settled trust that I mentioned, called the revocable living trust. Many of you have them, you know, your family members have them, you know, parents, grandparents, aunts, uncles, they are the same and that they’re so settled, they’re created for you by you. But the difference is that with an asset protection version of this trust, it includes these critical provisions called spendthrift provisions. And what spendthrift provisions are is they are provisions that allow you to protect your assets from creditors, the people suing you, they are the actual teeth behind it. And for those to work, the Trust has to be not revocable, meaning it can be changed in order to be changed, but your revocable, so it’s a very different type of trust, you know, just like chocolate and vanilla, they’re both ice cream, but they’re very different types of ice cream. Now, this is where the fun really starts to happen. There are two major school of thoughts international and domestic, you can set them up here in the United States, or offshore, which you and I were talking about, you know, before we started recording. And this is where I think I’d like to talk about them both and through a historical context, because it’s very important if you’re going to understand how trusts work to understand the two basic components of them and their differences. So again, you really have you know, these two are really three options, you can establish them domestically in the United States, or you can set them up offshore and another country like the Cook Islands, or you can create a hybrid, okay. And for a little historical context, the offshore trust actually came first in 1984, when the famous Cook Islands created an asset protection trust. I like and choose the Cook Islands if and one is applicable, just because it offers the best home court advantage. Why it’s the best is because asset protection is what these trusts in the Cook Islands statutes were specifically drafted for. And the power of that foreign trust is that it has what’s called statutory non recognition of any other jurisdictional court orders or judgments in the world, including the United States. And so, what this means is that if you have a judgment against you in the United States, and they took it down to the Cook Islands, your US judgment is worthless, they literally can just throw it in the trash, it has no value whatsoever. statutorily the Cook Islands are just prohibited from recognizing it. And they have like these seven really strong hurdles that have to be jumped through. If someone wants to sue your trust in the Cook Islands, they will have to start the case all over from scratch. Okay, the person suing you would have to prove their case. And beyond a reasonable doubt. That’s the murder standard, the highest legal standard in the world, the 99% standard, not the 51% preponderance of the evidence. And again, I’m not sure what happened sure, like, let’s just give it to them. That doesn’t work like that down there. You can’t get a contingency fee attorney to represent you because they are not allowed down there. It’s an ethical in the Cook Islands, just like it used to be an ethical here in the United States, which got changed in the 60s. That claim meaning the lawsuit is not amendable. So, what this means is that once you file your complaint, that’s it, you can’t change it or amend it after discovery like you can the United States and then decide to go ahead and completely change what you’re even getting sued for. The person suing you is going to have to front the entire court costs and flying a judge from New Zealand. You can’t take your US attorneys with you down there. And then the great thing is if they lose, they pay. And this is one of the single worst things that we don’t have here in the United States that the loser does not need to pay the legal fees and costs of the winner. So, if you get sued by somebody for, I mean, a completely bogus reason, I mean, just like completely frivolous lawsuit and you end up spending $200,000 defending yourself from legal fees. And then finally the court throws out the lawsuit. Well, guess what? You’re still at $200,000. That person that sued you is not going to be getting the bill because of our legal system in the United States that would discourage lawsuits, and our legal system is run by trial. hire lawyers who don’t want to discourage lawsuits. Not to mention there’s only a one-year statute of limitations. Okay. Now, I want you to think back to what I told you, you know, that four-part test effectiveness, cost control and compliance. Okay, number one effectiveness, right, the foreign trust five out of five stars, right, like statutory nonrecognition. But what are the drawbacks? You know, what about the other three control costs and compliance on these, it actually falls short, the cost is going to be high. Generally, if you’re talking about setting up a purely foreign trust, you’re talking about, you know, anywhere from like 40 to $75,000, just to set it up. And then, you know, if you’re a purely foreign trust, you have a lot of IRS reporting compliance and disclosures to file, which are your 3520s and 3520, AES, which are full balance sheet disclosures, and even you know, the entire trust agreement with the IRS. And those are not cheap from a CPA standpoint. So, you’re going to be spending a lot of money just on that. And then you have additional factor count compliance that you’re going to have to do. And of course, you’re not going to be in control, because those trust don’t work. If you are in control. That’s why they work so well. And so many clients, they’re just not comfortable with that. And so, while you literally have the most effective trust in the world, by far, is not something that we usually start out with, because of the fact that we have all those three drawbacks. Which brings us to the second option now, the domestic asset protection trust, the domestic trust came into play 10 years later, of all places, it started in Alaska. And then not to be outdone, you know, yeah, Wyoming, Delaware, and Nevada, like, hey, we have to follow suit, you know, these, these are the states that are known for this. And so now we have about 19, or 20 states with some sort of domestic asset protection statutes. And so, the states are jumping on board seeing that our legal system is now completely a threat, and that things need to get done to protect your assets. And so, asset protection in the United States is very valid. And so, asset protection as a concept is very important for you to understand it is valid, it’s just how you do it. That’s really important. The issue with the purely domestic asset protection trust is that we live in the United States of America, we have a constitution, and an article four section one, we have the Full Faith and Credit Clause. This clause provides that every state must grant full faith and credit to the judicial proceedings of every other state. So, this means that for example, Nevada can pass an asset protection statute, which they have, but it cannot ignore California or Washington or like any other States court orders. So, we’re the Cook Islands can literally just throw that California judgment in the trash. Nevada cannot. Nevada must respect it constitutionally and even litigate it. And now we’re having courts that are simply ignoring the choice of law clause. For example, there’s a California case Kalka River Stillman that came out that said, hey, guess what, you’re a California resident. In California, we don’t recognize our, you know, asset protection stress, we don’t have self-settled spendthrift legislation. And so, we’re not recognizing you running off to Nevada or any out of state asset protection trusts, so we’re no longer recognizing those. So, the legal landscape is shifting again. And failure means breach and assets lost. And so, this is just unacceptable. And so, because of the case law that we’re seeing, I’m not a big fan of a purely domestic asset protection trust or anything that’s purely domestic without some sort of built-in offshore component. And this brings us to that third option which is a hybrid version called a bridge trust.
Pancham Gupta: Can ask you two questions, one for the purely foreign Cook Island and second for the domestic. Yeah, so do we have any case law or whatever you want to call it in foreign language for this were people who had pure foreign trust and they actually lost
Brian Bradley: now you really don’t because you have some where it’s been reached into because the clients didn’t give up control of the assets. So the ones where you have seen them breach was because one the attorney drafted them poorly or you just had very stubborn clients who would reflect some of them for example wanted to maintain themselves as the trust protector and the trustee mean no as the trust protector, they were the trustees but they wanted to be named as the trust protectors as well. So, though they’re removed as the main trustee once it’s in the Cook Islands, they’re still the trust protector so that still gives them ultimate control. And so that’s the issue is when you’re drafting these have to be drafted properly so when they’re drafted properly then no you don’t have any issue or case law of this purely foreign trust being pierced and then examples of this a couple of them I use unused really extreme cases right here just to show how strong these are when DUNS, you know, even somewhat correctly. So, you have that famous Anderson case. And this is you know, a guy who create a Ponzi scheme, just like complete criminal activity stuffed all his money in a purely foreign Cook Islands trust. They tried to reach out for the money. And even the Cook Islands Supreme Court were like, look, we hate to have to do this, but we have to protect the assets, because this is what our statutes are all about. So, we’re sorry, you know, Mia culpa, but we’re not letting you access into this. And this was, you know, the government coming after him for his money. So criminal activity, Ponzi scheme, money still safe from a super creditor, the government, the man who has infinite amount of money and resources.
Pancham Gupta: This is which country government This is us, the US government, okay?
Brian Bradley: In the Cook Islands, then you have the grant case, okay, this is where the husband stiffed the IRS for $36 million, stuffed it into purely Cook Islands account, had a heart attack and died. And then the government went after the wife, Mrs. Grant for the money. Okay, plus back taxes and all that went after her three times. And they’re and tried to hold on civil contempt of courts and failed. And again, you know, it was she’s out of control of this. And so, she, to her credit, tried to tell the offer Cook Islands, you know, Trustee give the money back. And the offshore trustee did what their job was and said, no, we’re not because you’re being forced under duress, we’re protecting it. So, she was out of control of the assets at that point. And they couldn’t hold her instance, civil contempt of court to force her to, because the judge said, it’s not up to her anymore. So even though we can want to order her to we can’t hold her in civil contempt, because it’s no longer up to her.
Pancham Gupta: And so that’s the use that money though, the money is still safe. So, can she use that money? No, it’s your beneficiary. No. So
Brian Bradley: the point of it right now is you want to protect the money. And the money just sits there safe. That’s where you can come in and force a settlement for like pennies on the dollar. That’s one of the Andersons did for I think it was like five or 10 cents on the dollar, I forget what it was. And that’s where, for some reason for her. I don’t know if she has now, but she did you know, at the time, she’d never settled the case. So, the money just sitting there, you know, where she went wrong with hers is she started giving her son $250,000 out of it. And so, then that I then the government found out what she was doing, and then they went after the 250 that she kept bringing it. If you don’t use it correctly, then you’re going to get in trouble. If you use it correctly, and you’re out of control at that point, or, you know, you force settle the case, then you bring the money back after the case is settled. And so, you have lots of, you know, these type of cases of just bad people doing bad things, and the trust of help, okay. And so I think it like again, it just goes to houses house, the trust drafted by the attorney, and then the client really needs to understand is when we have to go offshore, you have to be out of control, you cannot be the trust protector, and you’re going to be removed as a trustee. But that’s why these are so strong. Got it?
Pancham Gupta: So same question then for the domestic. Let’s again, for domestic, we have, like you said 20 states, every case state may have a case law. But you know, let’s talk about you’re talking about Nevada, do you have a case law for Nevada, where it has been if you know, on top your head, if not, that’s fine, a lot
Brian Bradley: of the top of my head, but we have that California case to cover Stillman. And this was a California resident using a Nevada out of state asset protection trusts in California saying like, no, we’re not doing this anymore. Like we don’t recognize them. And then you have this, like Morrison case and a bunch of other domestic cases now. And these are just cases of states that even have domestic asset protection statutes in them. And the judge is now based off of public policies and just ignoring them. So, you have strong facts, good facts in states that have domestic, you know, asset protection statutes in them. And now judges saying we don’t care; we’re not recognizing it anymore.
Pancham Gupta: So, in that California case, basically, they were able to go after the assets, which are trust in Nevada.
Brian Bradley: Yeah, reach the trust, because of our Constitution, Full Faith and Credit Clause. And so, in California doesn’t recognize out of state asset protection trust, we’re almost out of state anything. And so, if you’re a California resident, the whole point there is, there’s things that you can do, you have to walk a very thin line on what it is, and generally what is going to be is having an offshore connection to get out of that jurisdictional reach.
Pancham Gupta: Got it? Got it. Alright, so let’s talk about the bridge the number three.
Brian Bradley: Yeah. And so, this is, you know, like I said, like, think of it like hybrid cars, right, you know, you’re just combining the best of both. And so, what we’re doing is just taking the strength and power of the offshore with the ease and functionality of the domestic, and it’s been around for about 20 years. My partner, my affiliate, Doug created this about 20 years a little bit over 20 years ago now. And so, it is a fully registered offshore asset protection trust from day one. So, it is what it is it is an offshore trust. And then we have an offshore trustee in standby just in case you need them. But we build the bridge back for IRS compliance is so that the IRS classifies that trust as a domestic US trust, by complying with USC Section 7701. So, it’s like having two passports, you can have your Swiss passport, and the US passport. And as long as you have your US passport, the US will consider you as a US resident. So, because of that bridge, as long as we have our compliance, we stay classified through the IRS as a domestic trust. And what this means is that the trust is cheaper, is more flexible, you have none of the IRS compliance is in really not IRS tax filings and disclosures at all, because the trust is actually classified as a domestic US grantor trust. But you’re now getting the power of the offshore if and when you need it. It’s in your back pocket just like a contractor building out in a hall, you have all the tools now in your toolbox. It’s just when we use them, we don’t need to use them all at the same time. So, during the State of duress, let’s call it a doomsday lawsuit, your attorney would declare a state of duress. And we would break the compliance bridge with the IRS by removing you as the trustee. And at that point you are now what it is this just it’s just a purely foreign Cook Islands trust, then you will be needing to do those IRS disclosures while the trust is foreign. Once the case settles, then we can reestablish you as the main trustee and is back to being domestically that doesn’t breach
Pancham Gupta: if you, do it after the case to remove as a trustee. You know, just like you Okay,
Brian Bradley: good question. No, because the trust is just one trust, there’s no transfer of assets at all, the trust owns all the assets from the day we create it. So just by removing you as the trustee, there is no transfer of assets going on transferring of assets is a problem but not transferring of trustee the case gantry the trustee, we’re just not transplanters engine, your trust protectors. And it’s an allowable clause in the trust. And so again, it just goes how’s your trust created? And so, the trust protector should be allowed to under state of duress, remove the trustee and we already have the offshore trustee in standby beforehand when we created the trust, who did their due diligence on you in case of a state of duress. So, all this has been set up beforehand?
Pancham Gupta: Got it? Got it. Okay. So, the reason we are creating this bridge, so going back to your ECCC, right, effectiveness is there, right, but cost wise, it’s lower? It’s not as low as domestic, but it’s lower.
Brian Bradley: Yeah. So, it’s like domestic trust, generally, for asset protection are going to fall around. I’ll just say like 12,000 Generally on an on an average, and offshore trusts purely foreign, I would do like low balled and say 45. A bridge trust, just the trust itself, on average, about 23,000 for a hybrid. So, you’re falling about in the middle.
Pancham Gupta: Okay. And but the other two C’s?
Brian Bradley: Yeah. So then, so we just did what cost compliance? You don’t have any IRS tax filings whatsoever, because while is, you know, classified domestically by the IRS, with trust, you don’t have to disclose what’s in them. You’re protected from the NSA grantor trust? So, you have no IRS disclosures whatsoever.
Pancham Gupta: So, to see the disclosures, sorry. Yeah, go ahead. No, what was I was then as a side effect of that the compliance part, right? The only reason for my understanding you we are basically what we didn’t have in the foreign, but we have here is that in the foreign, we actually had to do the IRS filings and all that, because it was a foreign trust. But now that it is domestic, we don’t have to do that. So kinder, it kind of gives us the benefit of very less compliance
Brian Bradley: and privacy because you don’t have to disclose all the assets.
Pancham Gupta: Correct? Correct. Okay. Yeah. All right. Yeah, go ahead. So, control,
Brian Bradley: and then you’re still in control. Because remember, if you’re purely foreign, you have to give up control to the offshore trustee. So, while the trust is domestic, you’re still in control, because you are the trustee, up until the very last second worst, not in your best interest to be like a doomsday lawsuit, then we would remove you as the trustee. So how
Pancham Gupta: do you create that bridge? Is that the secret sauce? Or it’s like the neck, you know? So, what is it in that that you do that?
Brian Bradley: It’s just a migration clause really like an easy way to state it. And then it’s just complying with that USC code section 7701 is called the control test and the court test. And so as long as we maintain that government IRS compliance with that code section, that code section specifically lays out how you can domesticate a foreign trust to the IRS. Got it
Pancham Gupta: closed. Thank you so much for explaining that. I hope anyone listening this is probably the tip of the iceberg. And I do want to go to the second part of the show, and I know we kind of kind of hitting them an hour mark here. So Maybe I’ll get invited back Brian and discuss more depending on how you know people want it or not. So, email me if you guys want Brian back to go into more details there. We can, you know, bring Brian back. So, Thanks, Brian. for that. I want to go to the next section of the show, which we call taking the leap round and we’ll be back after this message. Do you ever feel overwhelmed by the thought that you have no time after work, and family time to learn about investing? Do you feel left behind that you are not putting your money to work for you? Do you want to create passive income, but you do not know where to start? If so, I have good news for you. I have created an investor club which I call the gold collar investor club for accredited investors, I will be putting together investing opportunities exclusively for this group. These are the opportunities where I have done my part of the due diligence for you and will be investing my own money alongside you. If you are interested, please sign up on the gold collar investor.com forward slash club, I repeat the gold collar investor.com forward slash club, I will reach out to schedule a 30-minute phone conversation to discuss your investing goals. Once you sign up, this can be a good opportunity to diversify and take some chips off the hands of Wall Street to produce some cash flow. And in case you are wondering, what is an accredited investor, credited investor is someone who has earned more than 200,000 as filing single, or more than 300,000 Filing Jointly for the last two years. Another way to qualify as an accredited investor is if your total net worth is more than $1 million. Excluding your personal home. It includes your stocks, 401, K’s, IRAs, cars, etc. Just not the equity in your personal home. If this, is you, I would highly encourage you to sign up? Alright, Brian, so here we go. The second part of the show which I call taking the leap brown My first question for you is when was the first time you invested outside of Wall Street? I know you mentioned that you like investing. So where do you invest?
Brian Bradley: I don’t know when a long time ago was like the first time, I just grew up very entrepreneurial. And you know, my family brought me up investing where to put my money, but I like to invest in underperforming notes. And so that’s where, you know, outside of Wall Street, you know, I like to put my money, or I like to lend money I like you know, I like to be more like a banker. And so, I like to lend money and have collateral agreements in case their projects go belly up, I can still get my money and investment back. So those are my two kinds of favorites.
Pancham Gupta: Nice. Nice. Okay, so did you have any fears that you had to overcome when you first started doing that?
Brian Bradley: Yeah, I think it’s almost like anybody, you know, I like to research and read before I do something, and you can kind of get lost in analysis paralysis. And eventually you just have to take the leap and jump, which I’m actually talking about, you know, it’s not an investment thing. But I’m talking to one of my buddies, I compete Brazilian jujitsu and I’m trying to convince one of my friends like, Dude, you’re good, like, the come and do the next tournament with me. And he’s, I got to prove to myself that I’m ready and not going to get hurt. And like, you’ll never know until you know, just jump in the deep end and swim brother. You know, it’s the same thing with investing. Like, there’s a million books to read. Eventually, you just going to have to jump in the deep end and move your arms and kick your feet and realize like, okay, I know how to float. Now let’s figure out how to swim.
Pancham Gupta: Yeah, that’s so true. So, so true. Alright, so my third question for you is, tell us about one investment that did not go as expected if you have one. Yeah,
Brian Bradley: I really was never big into like, fix and flips. And my, my ex-brother-in-law was like, hey, like, I’m going to get into investing. And I want to start flipping like, you want to do it with me. And I’m like, I’m not hands on guy, I’ll, you know, put in some money, but it just ended up like, couldn’t get the permit seeing and it just ended up bleeding cash, and, you know, like having to pay the mortgage and all of this stuff and licensing and ended up just saying like, Alright, we just got transferred into a long term hold, and then eventually, were able to offload it, you know, just as a longer process instead of like, the quick like, 90 days, it was like the quick year and a half.
Pancham Gupta: Oh, I see. All right, cool. So, my last question for you as what is one piece of advice would you give to people thinking of investing in Main Street that is outside of Wall Street?
Brian Bradley: Do your research, and I would say first decide, do you want to be active or passive because then it’s going to decide what type of investment, you’re going to get in. If you’re just dipping your toes and you’re nervous. Go like buy a syndication Share and Like dip your toes in or do a JV position with someone who’s experienced and has a track record and build yourself up. Otherwise, do your research and eventually you’re just Going to have to jump and learn through the hard knocks of life and realize deals will fall apart, you know, the proverbial excrement will happen. Don’t make it have you stop as an investor just learn from it and keep going.
Pancham Gupta: The Great, thank you Brian for answering that question. So, if people are intrigued after listening to this, and they’re like, oh my god, this is over their head. How can I connect with you and talk more about this?
Brian Bradley: Yeah, they can jump on my website www dot BTV legal.com I have it more as an educational resource with lots of case law frequently asked questions and you know, blog articles just breaking this stuff down. Because I want people just to be educated as they shop around and learn versus going to lawyers and having no clue what’s legit or what’s not as like have some case law with you and ask people questions, they can’t answer your questions. There’s a reason for it, they probably don’t know what they’re talking about. Or they can email me Brian email@example.com You know, I do generally an hour-long free consultation. So, you know whether you know, we’re right fit for each other or not, that’s not the point I’d rather you just get like a good opinion. And then you can you know, figure out what you want to do from there.
Pancham Gupta: But Awesome, thank you so much for being so generous and sharing your time and helping people thank you Brian. I you know, I’m sure people will have questions and I’d suggest the listeners reach out to Brian if they have thanks for your time. No, thanks for having me on. I hope you got some value from this show. If you’re confused definitely reach out to Brian, he can talk more about this is generous enough to share an hour like his one hour with everyone who’s interested. If you want if and if you have any questions do not hesitate to email them to me at firstname.lastname@example.org. That’s email@example.com Thanks for listening. This has been Pancham signing off. Until next time, take care.
Thank you for listening To the Gold Collar Investor Podcast. If you love what you’ve heard and you want more of Pancham Gupta, visit us at www.thegoldcollarinvestor.com And follow us on Facebook at The Gold Collar Investor. The information on this podcast are opinions. As always, please consult your own financial team before investing