TGCI 19: Wills, Trusts & Estate Planning – Something you Want to Ignore but Please Don’t! – Part 2

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Episode 19 - Wills, Trusts and Estate Planning Part 2– Something you Want to Ignore but Please Don’t

Show #19 - Kevin Day - Episode Art


In today’s show, Pancham interviews Kevin Day, Asset Protection Attorney, Day & Associates Incorporated.  In this second segment of the show, we discuss asset protection strategies for risk mitigation in case you are sued.

Did you know that you can lose everything that you own (including your home) in case you are involved in a car accident? What if your tenant slips and hurts himself seriously? Or, what if the boiler or a pipe bursts causing bodily harm to a third person? While such untoward incidents are outside your control, you can certainly do your bit to limit your liabilities and protect yourself as well as your family.  

In today’s show, we first categorize assets and then reveal the best way to protect them. Strategies discussed include forming LLC’s, Equity Stripping and Forming Trusts. But, is a LLC or a trust completely lawsuit proof? As per the statute of limitations, is there a time period beyond which you cannot be sued?

Pancham Gupta
TGCI 18 - kevin
Kevin Day

For all this and much more, tune in to our latest show now!

Show #19 - Quote - Kevin Day

Timestamped Shownotes:

  • 02:35 – Can probate court hand over children to relatives outside the United States?
  • 04:44 – What is asset protection? Kevin explains in simple terms
  • 06:33 – As a typical W-2 employee, are your assets exposed to any risks?
  • 08:02 – What is a “Homestead Exemption”?
  • 11:31 – What is the extent of potential liability if you are involved in a car accident? Does automobile insurance fully cover this risk?
  • 13:14 – Can you become a target of predatory lawsuits if you have too much insurance?
  • 15:25 – High Liability vs. Low Liability assets – Understanding the difference
  • 17:25 – How to protect your car in case you get sued
  • 21:35 – How to protect liquid assets like cash and stocks
  • 26:30 – Can you equity strip a property so that the property is 100% owned by your lender (the bank)?
  • 27:55 – Can the IRS go after your assets if they are housed under a LLC?
  • 31:34 – Are assets housed under a LCC protected against lawsuits?
  • 35:55 – Inside attacks and outside attacks due to which you risk losing your assets
  • 37:42 – Kevin shares a short history of trusts, and reveals how they first came into being
  • 40:12 – What is the ONLY way that you can create a lawsuit-proof trust?
  • 42:03 – Kevin explains how the “Copycat Law” allows you to create a trust with a commercial trustee to limit liability
  • 43:43 – As per the statute of limitations, is there a time period beyond which you cannot sue a person?
  • 44:50 – Is an oral contract legally binding?
  • 47:00 – Can you reduce the likelihood of being sued if all your assets are housed in LLC’s?
  • 53:38 – If you are wondering how the rich keep getting richer, tune in to our show 5 now
  • 55:16 – Get in touch with Pancham now!
  • 55:57– Share, Review and Subscribe to the show. Your encouragement keeps us going!

3 Key Points:

  1. Understanding the concept of Homestead Exemption
  2. How equity stripping can help you protect your real estate from unforeseen liabilities
  3. Statute of limitations, and the maximum period beyond which you cannot be sued

Read Full Transcript

Welcome to the Gold Collar 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.

Pancham: In the last episode, we discussed about succession planning with Kevin Day.  Succession planning talks about what will happen to your assets if something were to happen to you. It’s not a fun subject, but I would highly encourage you to listen to the episode number 18. It will go into the details of what succession planning is and how you can do it better. In today’s show, we are going to discuss about asset protection. That is, what do you need to do in order to protect your wealth that you have worked so hard for?

There is an old saying that, “Rich don’t own anything, but control everything”. 

Today I have invited Kevin Day back on the Gold Collar Investor podcast. He is one of our country’s foremost experts in both estate planning and asset protection. Kevin, welcome back to the show.

Kevin: I’m so glad to be here. How are you this morning? 

Pancham: I’m doing great. So are you ready to fire up my listeners do better estate planning and asset protection? 

Kevin: Absolutely. It’s something that they need to do not only for themselves, but their family. There’s so many options, so many easy steps that will protect what they work so hard for. 

Pancham: Great. Great. So you know, before we get into the asset protection side of things, we did a great show last time which was mainly focused on succession planning where we discussed  what wills are, what are Living Trusts and all of that stuff. There’s one question I wanted to ask before we go into the asset protection side of things today. And the question is that, you know, we discussed that if you do not have a living trust, the probate code will spend time in finding nearest relatives who can and are willing to take care of your kids. However, what happens if your relatives are not in the US? Can the probate code hand over the kids to the people outside of the United States? 

Kevin: Absolutely. Although they are over worked and have too many, you know….they’re making life decisions on so many children each day. They do have the children’s interests at heart. And so if a parent hasn’t named someone and you don’t have to name family, there might be reasons, you know, you know, I have no siblings. My parents are elderly, even though they would have given a loving environment. So I’m choosing my best friend here in the in the States, you know, and go through that effort. If they haven’t named somebody, whoever it is, then the court tries to find family members. And if it happens to be off shore, then that’s what it is. So if you have siblings, or parents that would be grandparents to your children. They will certainly work with that. But they’ll go through the same vetting. You know, do they have the room? Do they have the capacity, you know, or do they have health problems? It wouldn’t be able to care for, let’s say, a very small child where they’d be okay with somebody who’s eight.

Pancham: Right, right. 

Kevin: But yes, if they haven’t named, and there’s no one here that’s a relative and there are relatives abroad, they’ll be the ones that would be granted. 

Pancham: Okay. Well, thank you. Thank you for answering that. So listeners if you have not heard the episode 18 and you’re confused by my previous question and you know, want to know the background behind it, I would highly, highly encourage you to listen to that show. You know, Kevin has a shared lot of his knowledge in that particular episode about succession planning. So now let’s get to today’s topic, asset protection. So can you describe what asset protection is? And also what kind of things are we protecting against? You know, what kind of attacks? Whether they’re inside or outside? What are we really protecting against? 

Kevin: Yes, asset protection, which is, I guess the legal term for lawsuit protection. (That) is really what we’re talking about. And what we want to do is if there was a lawsuit of any sort, and we’ll will break it down from inside of companies or outside of companies that you may have. But if there’s a lawsuit, we want to put you and your family in a better position than you would have been otherwise. Now, you still might lose some things. But depending on the levels of liability and priorities, we structure people differently. So there may be reasons to keep certain things in your name, because they’re so high liability, or they’re so closely associated with you know, like my law firm, it’s, you know, Tresp, Day and Associates Inc. My name is clearly on it. And so I’m has and so if I have Kevin shoes shop, they’re going to name me along with my company. So why give them an extra target? So, lawsuit protection, if you have all passive income, you know. We have people that have gotten to the stage where they say, I’ve made lots of money, I’ve made my benchmark, and I’ve got enough for me and inheritance for the kids. I’m going to sell my company and I’m just going to be in, you know, real estate and these other things. I’m going to have managers and I’m going to sit back, then we probably could lawsuit protect every little inch of things. 

Pancham: Oh, nice. Okay, so let’s say, you know, let’s start with a very, very simple scenario of a family. Let’s say this family does not own any of the high liability assets. Right? And both husband and wife have W-2 jobs to have their own house, which they own, and they have some cars, some stocks and their 401k and that’s it. Right? What can happen to them, you know, what kind of different attacks that we are protecting against for a family in this example? 

Kevin: Yes. 401k’s are protected by federal law ERISA. So OJ had a trust that was made many years before the death of his wife, ex-wife. And in the Isle of Man, he had pensions, 401k’s that that were protected by ERISA and everything else. Almost everything else he sold and flew to Florida and bought property because Florida and Texas have a full homestead exemption. Both Florida and Texas have narrowed, you just can’t fly in and buy the property anymore. You have to have so many years of residency because they didn’t want to be an outlaw state encouraging people in bad situations to come there. But they wanted to support the legitimacy of their homesteads. Most other states. I’ll use California as an example.

Pancham: What is homestead exemption? 

Kevin: Excellent. A homestead exemption comes from old, kind of old west America where your homestead or ranch was protected, because it should have, you know…there was an expectation if something was really, really bad that you could lose your bank accounts and everything but your children and family and your heirs would have at least the land because that was the most precious, particularly the home. So continue along but you have to register specifically for it and every single state it doesn’t come automatically. 

Pancham: I see. 

Kevin: It’s an exemption to fraudulent conveyance, which we will definitely be talking about later. So literally, if you are about to file bankruptcy, you could go down to the county and file your homestead exemption. And then walk to the bankruptcy court and file bankruptcy, which in every other situation, if you had known existing creditors, that’s why you’re filing bankruptcy, that you couldn’t do something that protected. If you already have a creditor, it’s very difficult. Although there are some ways and we’ll discuss those, you’re not supposed to move things out of harm’s way. Now what really happens, they’ve all been pared down the whole ranch or the whole home isn’t protected anymore. In California and most other states, it’s just a small amount. In California it is larger than most, the homestead is, let’s say $65,000 which just means when your creditor. If you had, you know, 700,000 or a million dollars in equity, they’re going to be a judicial foreclosure a judicial foreclosure only cost three to $5,000. So if I have several million dollar judgment and all you have is a home, I’m going to say absolutely. Even if you only have if you had $100,000 worth of equity, I’m really mad at you. I’ve spent $150,000 suing you over the last year and a half, and I just get a piece of paper. And my attorney says, “Oh, for $3,000-$4,000, we can run the judicial foreclosure. They will the bad defendant will get their 65,000. So you won’t get that much more if it’s not an institutional creditor”. People are very emotional. And they say, yeah, they’ve made my life horrible. I’ve got this and I have nothing to show for it. I want to kick them out of their house. And so even though I’m only going to get $40,000 it’s worth it. Let’s run the foreclosure.

Pancham: Right. 

Kevin: It’s like the $65,000. So you don’t become a ward of the state and you can go out and rent an apartment and so that amount of homestead will be protected. In other states, it’s actually much less than 65. 

Pancham: Okay, going back to this example, then where we have this family and they have home and let’s say they’re not in the state of Florida or Texas, they can lose all of the things accepted 401k if they get hit by a lawsuit, then that can happen. You know, if someone let’s say, hit by driving hit someone, and they get a lawsuit from that. Right? As simple as that. 

Kevin: Yes, in our society, we take driving for granted. And we have become steeled to the fact that we need to drive and we want to drive and it’s a high liability activity, but we still do it. That’s our modern life. It doesn’t and most people might have two maybe $3 million. Some people have $1.5 million in auto insurance. You really can’t get, you know, one, it becomes astronomical. And it’s very hard to get auto insurance at five or $10 million. You don’t have to hit a bus full of children to get into an $8 or $10 million judgment, you can hit a family of four. And if it’s the wrong kind of damage, and somebody was at Stanford, you know, studying something where they would have made a lot of money, they’re not dead, they’re paralyzed their careers done, you could easily get an $8 or $10 million judge. So you can’t get that kind of insurance. You don’t want to pay for that amount of insurance. So, and we’re about to launch and a little bit into the what you could do to protect it, but it’s easy. And if you have one rental and you have a boiler blow up, again, a family of four or five you can get into these high amounts, the slips and fall and, you know, little electric socket that burns somebody but doesn’t really paralyze them harm them, you know, insurance is going to take care of those. You always want to have insurance as the first line of defence, but actually having too much insurance, if you could get it, you end up becoming a target because there is an underbelly of attorneys that are looking for people that have….that’s what you know, we call them malicious or predatory lawsuits that look for people with high insurance. That means it’s kind of taken out of the person’s hands, and the insurance company leads with, “Oh, this is going to cost us too much to defend. Let’s go ahead and pay this amount”. So you don’t want to over ensure and then as we also know, insurance always has a bunch of exceptions. You know, they “fine print” and there’s certain things they’re never going to cover. And very rarely are people very cognizant of those fine prints. They’re looking at the bigger picture. They think their broker has, you know, has covered everything for them. And they probably have for standards. But if you fall into one of those exceptions, then you have no insurance. And a good example of that is a, a breach of contract. Lawsuit almost always names you personally, and as an allegation of fraud. It’s really and they everybody does it because they are blackmailing you to settle for a couple million more because they know that if they can get their allegation of fraud to be believed by a judge or a jury, then insurance never covers fraud. And so it’s another one of those things that is to frighten you to settle for more money. 

Pancham: Got it. Got it. Alright, so let’s talk about family. Continue with this example.  So what can they do to protect the scenario? Let’s say they had a family of four and what they should have done before that event happens? You have to know that they are protected, assuming they have right amount of insurance and all that. 

Kevin: Yeah, that scenario, I’m typically thinking, if it’s a small amount of equity, we would probably… in their home, right, and they have their 401k. But they also have a good amount of savings. Do they have stocks? Do they have a rental yet or no? 

Pancham: So let’s talk about a case where there’s no rental but let’s say they have all between their stocks, cars and their house. They have about $1 million dollars. $750,000 to $1 million and equity all together. 

Kevin: Yes. As asset protection lawyers. What we do is there are finer breakouts, but we have essentially three different categories: high liability assets, like cars, and zero liability assets like cash. A home, a rental is higher liability, its good income, but you don’t control what’s happening on the premises. Your home is a fairly low liability asset. Things can still happen on it that harm third parties, but you are controlling the environment and the people typically that are there are your friends. There might be some solicitor on the front porch that slips and sues you. There is a case that happened. You know, I think its Omaha Meats….It might not have been that but it was the seller of meats. And the people said, “No solicitors you know. Don’t come to our door”. No trespassing, and this guy comes up anyway. And he’s told it the door. No, we don’t take solicitors Thank you. And he goes back down and right at the end of the driveway, he falls. And then he gets up, collects his stuff and puts it in his car and drives on. Three months later, they got sued because the guy slipped on their property. And that lawsuit was allowed in court, despite all the, “Don’t come on our property and no solicitations”. So there is some liability but you know, it’s relatively low. So the cash we want to get away from you and your family into a lawsuit proof, you know, bucket, so to speak, your cars will leave in your name because the driver of the car get it, punch him if I lend you my car. You would get sued for negligently drawing driving it because you hit a person. And I will be sued because my car hit them. And I have responsibility of deciding who to give my car to or not. So both of us even though I hit someone and I was driving your car and you have nothing to do with it. You get involved in the lawsuit just because of the title. Absolutely. So we don’t want to put the cars in any kind of company or isolated because you’re always going to be sued anyway. If you have a fleet of cars because you have a construction company or something or a plumbing company and have a bunch of trucks, you might get the right off. You would put all the cars in one LLC, and you get it right off that way. But for those of us even if we have, you know, several companies, I never take it right off within the company. I get a travel stipend every month that would be about the same as if it was a pre-tax expense. You talk to your CPA about that. That’s rarely done. But I don’t want it my company because I don’t want my company sued. I’m going to get sued any way I’m going to be hit by lightning bolt. So put the car in my name, but we can equity strip my car. And it’s an old Datsun. Not even a Nissan yet a Datsun car, there’s probably not much value there. I’m not going to put a lien on it. But if it’s a Range Rover, or its high end, you know, Toyota that I just bought, I want to protect that. I don’t want that taken away by the marshal because I got a judgment in some other event. So we can create a privacy company in Nevada or Wyoming. They’re fairly inexpensive. And your name isn’t in the public records. So nobody knows it relates to you. We make it look like a hard money lender. For instance, it depends on the circumstances of the family, whether we’re creating an intellectual property holding company or something like that, but certainly a lending, what looks like a lending company applies to all of us. And so we call it whatever the clients going to call it, Golden Mountain Lending. And we can put a UCC one. So for properties, it’s a mortgage, or second deed of trust. And everything else is called personal property. So we have real property and we have personal property. So your coal car, your gold bars, your, you know, anything else you own is personal property. And we can encumber it with what’s called a UCC one form which is a Uniform Commercial Code form that puts a senior lien on the car so the car can’t be taken.

Pancham: I see. Okay, so there’s a lot of lot of information in the last year thing that you mentioned. So let’s break it down one by one. 

Kevin:  So I’ll start off. So we, we discussed, you know, equity stripping. We’ll get into that. And we also discuss taking the cash away. So let’s say, you know, this family wants to take their cash away. What can we do with just cash which is a very, very low liability asset? Right now, they have it in their personal bank account, right, for instance, or a high yielding account. Whatever it is. 

Pancham: Yes, we still want it invested the same way that the family feels correct for their strategies. But I’m going to use the example first because it’s a good one. Most of us carry two checkbooks, or have two checkbooks. One is the checking account and the other is the savings account that makes more interest. Right now we get negative four, and we get 1% or 2% in our savings, but most of us remember where you would get 3% or 2% in your checking, but you’ve got 8, 10, 15% in your long term savings account. And what you would do is you would, “Oh, I need to make the mortgage payment, I need to buy groceries”. And we would move, you know, $5,000-$10,000 over into checking to write those checks. So same buys, but we’re going to take the long term savings account and make it an account of the privacy company in Nevada.

Kevin: And so you still have two checking accounts. One says Kevin Day checking account and the other says Golden Mountain funding with Kevin Day is the manager that has a long term savings account. So you still operate exactly the way but we’re changing the title to lower the profile. And ultimately, we would want and we haven’t talked about ownership and how that relates to lawsuit protection yet, but that’s the first step you get your zero and low liability assets out of your technical name. Because the low hanging fruit like cash and portfolio is what a creditor wants, right? The attorney handling it for them doesn’t want a real property, if they can avoid it. A creditor becomes the owner of that and it might take several months to sell and something else happens on the property then they’re liable for it. And businesses are even harder. They have to run a business if they now are the new owner of the business. So their cash portfolio so that’s the first thing you get away from your technical ownership. 

Pancham: Right. So let me rephrase what you just said in my own words, and also kindly summarize the equity stripping part of it, and even discuss what equity stripping is. And then we can go into the ownership side of things. So what you’re saying is like right now owning my own bank account and having my gosh sitting there, my stock sitting there, makes it very, very susceptible to lawsuits. And if I get sued personally, people can come back after it. Right. And they can just get judgment against me and I would have to give all of that money away to them. But now, in order to protect that, what we can do is we can create a LLC, which is managed by me. That’s Pancham… Right? In Nevada, and let’s call it ABC LLC, and that ABC LLC will have its own checking account or savings account. Like in the old days, we used to move savings to checking when we want to pay for something. Same thing we will do hair will take the money from this particular account and move to our personal checking account whenever we want do something… like big. And otherwise we’ll keep the money there. And now this money is not in my personal name. It’s in this LLC’s name, which is managed by me. Right so that’s for the cash and for the equity stripping it’s a technique that you use for asset protection which kind of strips out any equity in the home by creating a lien against the house as if, you know, someone has lent money on this particular house. Just like banks put liens, you can put your own lien by creating your own company and for that you will create another company or maybe the same company and that you had created for your personal name and you will use that to put the UCC-1 on your cars and on your house to strip out the equity from that which means that it will seem like, you know, someone has lent money. The lien position one would be the bank was lent money and then lien position to would be this Golden Mountain lending, which is again, a Nevada based LLC and owned by you. Does that summarize what you just said so far? 

Kevin: Precisely. And everybody does have an understanding of the equity stripping because they have purchased a home when they use credit. The biggest question is they say, “Well, how can I lien myself? Because from a purely lawsuit protection point of view is problematic to say, “Oh, I will strip all the equity out of my home with the bank”. And the problem there has several issues. One, you now are forced to worry about, am I making enough investment income to pay for it because I’m really just doing it for lawsuit protection, not some other investment that will make good money. And the other is banks never give you 100%. So the bank always creates that cushion. So you have 20 25% of the value always there. And then also, what do you do with that money? Because they’re going to say, “Oh, we have this, you know, lien, you know whether how did you invest the money?” So forth. So, what we do is creating this, you know, Pine Tree lending, Golden Mountain lending, whatever the client will call it, and we create the proper consideration. And so essentially, it’s you and you now. This is where you get the emotional hurdle. Well, that doesn’t sound like it should be legal or I shouldn’t be able to do that. And fortunately, because the IRS code, and the corporation’s code of every single state says that we have to treat our own companies as if t’s a third party. So technically, when I hire myself, for my own job, I sign as the officer that’s hiring me. And then I signed below that, that I’m accepting that responsibility and everything of the contract as my own employee.

And if you get a loan from your own company, the IRS code and the corporations code says that you have to have a documented loan especially since it’s with you. 

Pancham: Would have a loan agreement. 

Kevin: Yes, you have to have an interest rate. I had a client that was saving up in her company to buy a building for her firm. She and her husband found the perfect lot in the perfect place for their dream home. They she needed, you know, a couple of million dollars to buy the commercial building that she wanted and they weren’t there yet and they said, well, “Let’s use let’s borrow from my firm, build our house, then when we sell the house we’re living in we will, you know,  pay back the firm”. But she went further. She made payments regularly, monthly. She got an audit of, I think, a year and a half, two years later. And they came in there and they said, “Oh, we see this payment here”. And what is that? It’s the repayment of the loan I took. And in the memo, she said, “Repayment of loan”. And she paid every month. They said, Well, where’s the agreement? And what interest are you charging? And she said, “Oh, I didn’t know I had to do that”. And they said, “Well, we’re going to characterize that as a distribution that you made two years ago, and you didn’t declare it so we’re going to give you penalties”. And it was income back then so it was taxed. And you didn’t have the withholdings it was a horrible mess.


Somebody who really wasn’t doing anything nefarious was trying to do the right thing was paying back, but it technically didn’t meet the grade. So we can tap take advantage on the other side. If we borrow from our own private family bank Gold Mountain Lending, we can charge a low interest or high interest. But we can also demand when we’re wearing the hat as the manager of Golden Mountain. I’m not going to give you this intellectual property or this money, or this line of credit, if I don’t get a secured creditor position. Right? I would if I gave you a line of credit, you’ve only borrowed $2000, Pancham. But I give you a $2 million line of credit. I’m going to say I’m only going to do that if I get the security interest. I want to put liens against the equity in your home. The accounts receivable in your business and everything else. And you say I willing to do that, right? Remember, you’re wearing two hats. But the law says your companies can demand the view exactly what Kevin would or Bank of America would. So we’re going to take advantage of that loophole. That’s why it’s completely legal. 

Pancham: Great, great. So now, if it wasn’t complicated enough, let’s make it a little more complicated. You know, let’s step it up a notch. So now let’s talk about the ownership side. Right? So now this Golden Mountain Lending is owned by me. Right? Let’s say…right? And before the bank account was in my name, their house we had in my name and equity was in my name. Now we moved everything over to this LLC, this company, which is based out of Nevada or Wyoming right now, like you mentioned before, right, everyone, if they sue you, they not only sue you, this whoever that you own. So now any sue you personally as well. Now in this particular case, I own this company called Golden Mountain Lending, right? What happens? Can’t they come back and go after the assets of this company, which is Golden Mountain Lending? 

Kevin: Yes. And you mentioned at the very beginning in your opening, the difference between internal liability and external liability correct. And, essentially, and everybody’s probably heard of this or understand this concept. When most people go into their corporate lawyer, their real estate lawyer or their estate planning lawyer and say I want lawsuit protection. They go how many assets do you have? Oh, you need three LLC’s or you need nine LLC’s. Period, and we’re going to put each one of your major assets and different assets in these different LLC in these different buckets and that the end of the story. And the presumption is that you will lose the equity in any particular bucket. But at least it doesn’t bleed over and take your home or your other investments. Well, we have strategies that we will ultimately get into the can protect the equity in every single particular bucket, not just protect your other assets from a higher liability asset that’s been cordoned off. You know, putting eggs in different baskets is always wise. But we don’t want to lose the exit or in any particular basket. That’s internal liability. We’re trying to protect or keep the liability in a particular LLC from getting out of that box. But if we’re sued personally, because it’s that car accident, or it’s a breach of contract, and they’re alleging fraud, and getting to you personally then they come down the ownership chain. And they say, what do you own? Well, I own all these LLC’s. So the way to correct that is a lawsuit-proof trust. So everybody’s familiar with LLC’s, LLP’s, and limited partnerships. They are separate legal people under the law, but all of them have to have an owner. And so an LLC can be owned by a corporation that’s owned by an LP that’s on by in court, court, court, court, court. We can only end in two things. Our legal system only has two ultimate owners of flesh and blood human, no one owns you. And no one owns an irrevocable trust. You can be the beneficiary of it, or you might be a trustee of it, but it is the owner, which creates two important things for us. One is it’s truly lawsuit proof and I can tell the judge on the other side that we set this up three years ago. And you know, she didn’t hit them in the crosswalk until, you know, last month or didn’t enter into that contract until six months ago. So there’s absolutely no fraudulent commands. And here it is, you can’t get to it. But a better position is you have legal deniability, because during the lawsuit, they don’t get to ask…we should go through the whole analysis of a lawsuit. So people understand that. So let’s stop here. And why don’t you do a breakdown so far between the outer and inner liability?

Pancham:  Yeah, sure. So going back to Kevin, what you just said, let me just break down what in a attack and the inside attack an outside attack is.  Right? The inside attack is something you are protecting from inside for instance, if I’m owning rental property and something happens to the tenants because the boiler posted, it’s going to be called as inside attack. And if something and you know, if I hit someone with the car and they sue me personally, and they can come after that particular rental home, which is owned by the LLC, which is eventually owned by me as a manager that would be an outside attack on that house. So that’s what you have. We have two kinds of attack inside attack and outside attack. And what you’re saying is that in our legal system, everything is owned by only two things. One a warm body, a human being, you know, where no one owns the human being itself. Right? And the second thing is the irrevocable trust. Right?

Kevin: Those are the ultimate owners. 

Pancham: So now what you’re trying to do is you’re trying to move the ownership from the warm body into this irrevocable trust. In our example that we were talking about before, which was Golden Mountain Lending, where I was the manager of that, instead of me being the manager of that, you would have a trust being the owner of that. The manager would be the warm body still, but the owner is the irrevocable trust. Is that right? 

Kevin: Correct. 

Pancham: And can you talk about like the history of these trust, like how this came about, like you had a great, you know, very, very quickly, insight into, like, why they came about and how this all happened, like why they came into existence.

Kevin: Okay, in a shorter form if possible. 

Pancham: Yeah

Kevin:  they came into existence back in the ninth and 10th century, the only older law from a Western perspective, common law is real estate law, because that was the big major asset. The king or queen, owned all of the dirt in their country. And what they would do is, “Oh, you help me in that battle. You were essential. So I’m going to give you 800,000 acres up in North Umberland”. But you really don’t own it. You have a use right. And these lists of uses became today’s real estate law. The next one was because we’re a couple of things. Separation of church and state, and also because the use rights were written in such a way – if the Lord of that manor, the person that had the use of those 800,000 acres, said, I want to create a church for the local community, they would carve it out and put it in a trust. And that was its initial use. And then during the crusades, in England particularly they had in France and Germany, they have this thing called prima janitor, that when the father died, the eldest son would inherit everything. And the next son went into the military. The next one went into the church. Next one became scholar, there was kind of a setup. And if there was believable information coming back from the crusades, the eldest son literally could go if they were not the ilk that we would want them to be, would go to their mom and siblings and say, “Get off my property. I’m the new owner”. And so these knights would start to put their properties, these lords into trust before they left. So there was somebody that had legal authority, kind of agent, power of attorney to run the estate. So that those things didn’t happen. And since then, they’ve blown up into we’ve got all trust kind of behave the same. In the United States. The only way to create a lawsuit proof trust was to give it all away. And that would be, you know, a parent or grandparent sets up a trust for their child, children, their grandchildren, and they the original, let’s say, me, I’d set up a trust for my children. And I would make a brother in law, our sister, the trustee. My children are the beneficial owners. That’s the good end of the stick, they get all the stuff in it under certain conditions, but I could not name myself as the trustee or a beneficiary. I was retaining…if I held either one of those I have too much control. And it’s pure simple by lawsuits. In 1985, this thing came up called The Hague Convention on trust. And the US ultimately became a signatory to that. And so in the late 80s, was the first time ever, under US law that you could set up a trust. And the other countries law would be the law of the land in the US. And there are some countries that allowed you to set up an irrevocable trust and name yourself as beneficiaries. And that was a real change in the United States. 

Pancham: Great. No, thanks for giving that quick background on the trust. So now, let’s get back to this right. So you’re saying that we create this irrevocable trust. Right? Where you are the beneficiary and you are the trustee, as well? 

Kevin: No. Okay. So there’s officer trust. And about 11 years later in 1997, the first state in the United States, Alaska has copycat law. And the copycat, it was essentially said you could set up a trust and name yourself as a beneficiary, but not the trustee. And so these are much less expensive than the offshore. We have a lot of people that just have a little sandwich shop or have, you know, a couple of 20 year old drivers that deliver pizza, you know, that need extra liability that insurance wouldn’t ever cover one bad evening at a little sandwich shop. So we want to give them lawsuit protection without the expense of the International trust. There’s plenty of your clients that also can use the offshore but the domestic one is the one that we’re expecting. Usually will set it up with a commercial trustee in the particular state that we establish it. Nevada or Delaware, not Delaware too much. The trustees are too expensive. South Dakota, Alaska, but Nevada is a very good one because it has a two year statute of limitations on attacking it where most of the other states have a four year. 

What does that mean? 

So the statute of limitations is a legal term that tells you that there’s a reasonable time, based on the circumstances for someone to sue you. So a tort, which would be, you know, somebody slipped and fell on your porch, a car accident.  Accidents are in strange places, you might be in unfamiliar areas, and therefore you don’t necessarily know who the witnesses are. So if I was going to sue you for something that was done and you were 20. And I was 30. Well, that would make me 30. I’m going to say, “Hey, he’s only 20. I’m going to wait until he’s 30 or 40 when he has a business and good income”. And the court says, “No, that’s not reasonable because it was an accident or a weird circumstance”. When I see you when you’re 40. You go, “You know, what accident?” If you remember it and say, “I have no idea who is there”. So there’s a one year statute of limitations on suing for a tort. And you can say, “Yeah, I remember a police officer came by but they didn’t think it was enough”. They got called off. But I remember there is this lady, you might be able to, you know, your memory of the accident maybe some of the witnesses would still be there. Breach of contract. Its four years if it’s written. Its two years, if it’s oral. A lot of people come to me and say, you know, I need a litigator because I’ve been making these payments. I receive some of the product and they stopped sending it to me, but I don’t have a contract. I said, “Yeah, you have a contract. It’s oral”. And you have enough evidence that there was a contract. You were paying them. They were sending a product. It’s a little bit harder to prove. Writing is better, because it’s clear. But you do have and you have 2 years to sue. If it’s in written, it’s more clear. So it goes out further. 

Pancham: So for Nevada, that’s two years. So basically, if someone comes and Sue’s me and I go and then start creating trust, or I had created trust just a year ago, then that would be a problem. Right? But if it is more than two years, and I get a lawsuit after those two years of setup, then it’s kind of outside of that limitation. 

Kevin: Correct. 

Pancham: Right, right. Okay, great. So now, let’s say like we talked about a lot of things and I want to kind of summarize this is revocable trust a little bit. So that listeners can put a structure around their thinking that you once you create this irrevocable trust where you are the beneficiary and there is a trustee, you have removed yourself from the ownership of this and going back to that example of that family which has you know, million dollars in assets which they are trying to protect, which are very low liability in general, like, you know, their own home, their own home and their stocks and cash, they can put that in this LLC, the Nevada-based LLC and the owner of that LLC would be this trust and you will be the beneficiary of that trust. Right. So if they have done this setup, and now they go and they have this same example like, you know, they have this accident where they hit someone and they come and sue them. What will happen? What would the judge do in this case? 

Kevin: Yes. So a very interesting thing about the lawsuit is the person that suing you has that statute of limitations. So let’s say it’s a breach of contract and there’s an oral contract. So they have two years to research you. You don’t even know that they’re thinking about suing you. The attorney will look at…especially if it’s a contingency fee lawyer. A contingency fee lawyer is a business partner, and they’re not in it to crusade for anything good just your side. So both, you know, bad attorney and you make some money. 

Pancham: Just to clarify that contingency fee lawyer is the one where they get money only if they win the judgment. Right. They get a percentage of that judgment, but they don’t charge you any fee until that happens. 

Kevin: Correct. They typically get 33%. If it settles early, if it goes to trial, it’s usually 40%. And going to trial means usually a month or even two before the trial, because then they start putting paralegals and other people to research things. So you don’t have to, you could still have a settlement after that, and you’ll have to pay 40%. So the contingency fee lawyers saying, “Hey, this is a great case. And we’ve had very similar circumstances, and we’ve made $4, million $5 million with this kind of lawsuit. But we’ve looked into Kevin, and he drives a old Pinto, and he rents a single family residence. He doesn’t seem to own anything. He’s a turnip. So we don’t want to spend our hundred thousand dollars to just get a piece of paper. We’re not going to take your case. We’re very sorry”. An hourly lawyer will go ahead and say, “Give us $5,000. Let’s start doing some research and everything”. And they go, “He owns, you know, several businesses. At least he’s, you know, an officer in the public record on three different businesses, you’re usually not an officer on something unless you have some kind of ownership there might he might not own 100%. But he’s probably an owner of these three businesses. His name comes up on several about, you know, eight or nine LLC is that we found own real property. So he’s got real property. He’s got three real properties, right in his personal name. This is going to be a field day. Yes, let’s go on”. Or they go… 

Pancham: Or in this example, the one that I was given where they have just scars and stocks and some cash, right? 

Kevin: Yes. So what they’re going to do is say, well, they’re an employee, they got home, but a Union Bank is on first and Golden Mountain Funding on second. There’s no equity in the home. We don’t know if these people are they must be real consumers. They’re up to their eyeballs in hock. So the contingency fee attorney, it’s a huge just incentive to even start the lawsuit. The hourly is going to start manage their expectation goes down. They have to manage their client’s expectation. They don’t want to be the bad guy saying we continue to encourage you. You continue to encourage us to run this lawsuit and pay you more and more money and the lawsuit ended up costing us $120. And we “won”. You didn’t do any research that these people didn’t have any money. So they stood there, the attorneys expectation goes down. He or she then goes to their client and says it’s a great case, but this isn’t a good defendant. Let’s write a nasty gram. See if they’ll settle. Maybe see if they have some insurance and take the insurance. But if there’s a settlement, it’ll probably be what the insurances are low. Let’s take it and get out of town. It’s mostly because they don’t want an angry client that’s now spreading the word around town, what a horrible attorney they were, and how much money they took. So they want to just get out and tell the client early that it’s probably going to be a low settlement and early. In the scenario, where they said, “Oh, there’s three businesses right now”. That attorney says there’s a lot there. And this is an important thing, all your listeners should write down. Less than 1% of cases go all the way to trial. Less than 1% at a trial. What does that tell us? That means even if you have a great case, it’s all about blackmail. And both parties are afraid of the weird things that happen in court.

So even if they hold all the cards and you have a lot of assets, it just means if it doesn’t look like you have too many assets, there’s no equity in your home.

The lawsuit either doesn’t start or it settles low and early. But if I’m an hourly attorney and you’ve got a lot of assets, I don’t want to go to trial either, but I’m going to puff up my chest. That’s what litigators do. “Oh, we’re going to rake you over the coals. You’re going to lose your home you’re going to lose all this stuff”. Ante up two more million dollars. Why would they settle early? They’re going to keep on banging away making your life miserable. You’re getting sleepless nights. You are so occupied with the lawsuit, your business starts to depreciate because of that. Husband and wife are at each other’s throats because they’re so on edge. And that is the way to make an extra million or two on the table. So we’re going to wait to the court room steps. But we don’t even with all the aces in our hands, weird things happen in the court. So we’re going to settle. We’re just going to settle late. So by having your home equity strip, having UCC-1 on your cars, you look like you’re the American consumers are on your list, and why bark up that tree? And our clients have been through it and the strategies really do work. 

Pancham: Great. Great. Thank you, Kevin. We’ll be back after this message.

Have you ever wondered why the rich keep getting richer? What is the secret that they know but you do not. What if I told you that wealthy people make their money work for them in two different places? Yes, the same dollars invested into different places and working hard for them while they sleep. They utilize these special accounts that have been in existence for more than hundred years. Do you want to learn more about these accounts? Then you are in the right place. Listen to the episode number five by going to the forward slash banking show, I repeat the Gold Collar investor forward slash banking show or visit the Gold Collar investor

Pancham: Alright, so, thank you Kevin for sharing your knowledge. I think we’re running out of time. And you know, I do this taking the leap round, but we did it already last week. So we can skip that for this show. And you’ve you’ve added a ton of value. You know, even though we have discussed this, I think multiple times now in the past, and I always learn something new when I talk to you. So thanks sharing your knowledge and if the listeners, you are curious, do reach out to me I can definitely connect you with Kevin and, you know their team. They’re really good at what they do. 

Kevin: Fantastic. Thank you so much, Pancham. Thank you Kevin.

Pancham: I hope you got value out of this show. We covered the basics of asset protection and it can get really complicated depending on the personal situation. It’s something we never think of buckets and important subject. So if you learn something from this episode and the previous one I want to know about it. I want to know if you took any action because of the show. It will mean a lot to me if you do let me know by emailing me at I repeat I love seeing people getting benefit are the shows. Also if you got value from this particular episode I would really, really appreciate if you can leave me a five star review on iTunes you can do so by going to I repeat There is a button on the top that you can head to leave me a review. Thanks for listening. If you have questions, email me at 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 and follow us on Facebook at The Gold Collar Investor. The information on this podcast our opinions as always, please consult your own financial team before investing

Show #19 - Kevin Day - Episode Art

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