Most investors assume LLCs for rental properties are the way to go in terms of asset protection. From a novice’s point of view, LLCs seem to provide everything you would need?—anonymity, simple tax filing statuses, and legal protection. But, an LLC in reality isn’t as airtight as most real estate investors think. And the worst time to learn about the limitations of an LLC is during a lawsuit, where your wealth (and sanity) is at risk.
To stop you from guessing when it comes to asset protection, we’ve brought on our go-to expert and heavy hitter asset protection lawyer, Brian T. Bradley, Esq . Not only is Brian well versed in the realm of asset protection, but he’s also helped numerous clients protect their real estate wealth, making him the perfect person to ask about LLCs, limited partnerships, trusts, and more.
Brian walks through the different types of legal “layering” that real estate investors can set up to protect themselves from lawsuits and angry creditors. He defines exactly how each type of real estate investor should set up their assets as their net worth expands, and what to do BEFORE you get served with a lawsuit. While Brian may not know your personal situation, he does speak with years of experience serving high-net-worth investor clients and can relay their mistakes (so you don’t make them too).
David: This is the BiggerPockets podcast show 595.
Brian: So as you go through and evaluate how good an asset protection plan is, just remember that acronym, ECCC, effectiveness, control, cost-
David: What’s going on, everyone? It’s David Green, your host of the BiggerPockets Real Estate podcast, the show where we teach you how to build financial freedom through real estate. Look, if you want to grow your wealth, if you want to improve your life, if you want to get your time back, if you want to travel the world, if you want to spend more time with family, if you want to have a better overall life, and you know that real estate is way you want to do it, you, my friend, are in the right place. BiggerPockets is a community of over two million members, all strong, all walking the same journey as you, and we at BiggerPockets are committed and dedicated to helping you achieve that goal. We do it through providing a forum where you can ask questions, an agent finder service where you can find real estate agents to help you with your deal, blogs with articles written by people that have done well, and this podcast where we bring in experts in the field that are relevant to what you need like we have today. Today’s a fantastic show that I can’t believe we’re actually going to be able to give you for free because it’s awesome, where we dive deep into asset protection with our guest, Brian Bradley. Now, in our show today, we cover a lot of topics about how to keep yourself safe as a real estate investor, as well as how to grow to the point where this would become relevant. Here joining me today is my awesome and fun co-host, Rob Abasolo. Rob, welcome to the show.
Rob: Hey, man. I always like being described as fun. I also would’ve accepted funny, but I can’t demand that. It has to be earned.
David: It’s funny you say that because we were just talking about how you add Y to the end of most words and create another word. I think it was bridgey that you just described and now fun and funny. You just can’t help yourself.
Rob: It’s the millennial way, man. It’s the millennially way. Do you ever feel like you have it, something about what you’re learning or an aspect of your business where you’re like, “I have this down, I have figured it out, I am a pro at this,” and then you talk to somebody so smart and well-versed in that specific area and then you’re like, “Oh, my goodness. I know nothing”? That’s kind of how today’s talk went when it came to asset protection.
David: You thought you had protected your assets, but you found out maybe you hadn’t.
Rob: Yes. Yeah. Yeah. Brian talks a lot about, well, A, trusts and how he relates it to Baskin-Robbins. There’s 29 flavors. There’s a lot of different types of trusts out there, common misconceptions about LLCs. He talks about protecting yourself and your assets, how it’s like layering up with clothes and how each layer of clothing gets a new layer of protection on your business.
David: Yeah. I think we also got into some of the very common misconceptions when it comes to different corporations or levels of asset protection where people think they’re safe where they’re really not. So make sure that you pay attention to what the first word means in an LLC and how that describes what you can expect from that company. We talk about what piercing the corporate veil really means. We talk about the safest way to protect some of your assets and when that might be necessary. Then also as a bonus, we got into how some of these structures can protect you in one sense, but can also build your wealth in another. So there’s a dual side to all of this. You’ve got the tax strategy side where you have to claim your income within these structures and you can benefit or you can maximize your tax benefits, and then that’s the offensive side, how you’re going to make more money. Then you’ve got the defensive side, which focuses on how you prevent people from taking it away from you. Now, this is probably the most commonly asked question in Robinized world is everyone would come to us and say, “Should I buy an LLC or should I buy in my own name?” So we wanted to bring you a show just like this with an actual attorney to go deep into how to know how you should start and where to go. Anything else you think that they should keep an eye out for, Rob?
Rob: No, man. This is really great. I’m really excited to have this because people always ask me about legal questions and I’m always just sweating profusely because I’m like, “I’m not an attorney. You can’t sue me.” So this episode I’m going to be like, “Here you go. Just listen to this. This will answer most of your legal of questions and it’s free.”
David: So here’s a good question. What type of things should people reach out to you to ask about?
Rob: If they want to invest or if they want to learn how to start an Airbnb or if they have questions about running an Airbnb business, anything in that capacity, but when it comes to taxes and legal liability, no, thank you. That’s not me. That’s not my jam.
David: That does make you nervous. People should reach out to me if they want to know about financing real estate, having an agent to help them to get it, if they’re looking to invest their money with somebody or if they want to be connected to the people I have in my world that do provide these services. So here’s just a good note. Please don’t ask us for legal advice, but you can ask us for the people that we use to get our legal advice. We would sweat a lot less if that was the case, and then I would be drinking less water from doing less sweating. All right. Before we move on to the show, let’s get to today’s quick tip. It’s so nice that I don’t have to do that high pitch quick tip that Brandon was always trying to do, and it was so hard to get my-
Rob: Quick tip.
David: Oh, so you do that so well. You’re just like Brandon. It is tax season. So I would like you to think about every single thing that you’re dealing with right now that you wish you were not and put a plan in place so that next year you don’t have to deal with it. The best way to do that is to get connected to a good CPA and actually plan throughout the year. So what I do is I meet with my CPA monthly. We go over my books. We go over the properties that I’m buying. We go over tax strategies, where I might be on the hook, and what type of real estate I would need to buy or what I would need to do to reduce my tax liability. I highly recommend doing the same thing. Meet with your CPA semi-regularly so that they’re not super long meetings and they’re not in the middle of nowhere where they’re busy and you’re like, “Hey, I got to talk to you right now?” Have it set up on a calendar so you can work around it, and if you don’t have a CPA you like, I’m happy to share with you mine. Send me a message on Facebook Messenger, Instagram, BiggerPockets or if you have my email, send it there and I’ll make a connection for you. Rob, anything that you’d like to leave our listeners with before we jump in to this jampacked show with Brian?
Rob: No. I’m not a lawyer or a CPA. So I’m just going to let Brian do all the talking today.
David: It wouldn’t be fair if you were a lawyer or a CPA and had a beautiful singing voice to match that face of yours. God, can’t give you every gift. It wouldn’t be fair to the rest of us.
Rob: I’ll take it. I’ll take it.
David: All right. Let’s bring in Brian. All right. Brian Bradley. Welcome to the BiggerPockets Real Estate podcast.
Brian: Thanks David and Rob for having me on. Today’s an important topic and I’m going to try to keep it less dense and not legal boring, and I’m not anyone’s attorney here, and I’m not a legal guru. We’re just going to be talking in generalities, and we’re going to be learning a lot, and I hope the concepts that we talk about help you and your listeners understand this area of asset protection. Specifically, we’re going to spend a lot of time later on on asset protection trust just to understand this world a little bit better.
Rob: I would argue that this is not boring at all. I mean, for the people that are actually at home listening to this or watching this on YouTube, these are some of the most asked about topics on the BiggerPockets YouTube channel, on my YouTube channel, on our social media. So I’m actually genuinely excited to learn how to protect myself so that I don’t get sued, Brian.
David: Yeah. Brian, how would you sum up what asset protection is?
Brian: Yeah. So what asset protection actually is is just think of it as a legal barrier between your assets and your potential creditors before you need it, and that’s the key word, before. That’s it. It’s just like a safe for your gold or your guns or your valuables, 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 the lien or reach. To mimic the rich, and I love that Tony Robbins is saying that success leaves clues. So the rich don’t own things in their personal name, their businesses do, their asset protection trusts do. They just get the beneficial use and enjoyment out of them while separating out the liability. Then as you grow, you just create different layers as you grow and scale up your planning.
David: When you talk about layers, in specific terms, what does that mean, also in layman’s terms?
Brian: Yeah. So in layman’s terms, let’s just break it down as key concepts and tools that we use. So I want you to think of each tool as a layer of clothing, and we add layers as you and your wealth grow. So these tools generally are going to be LLC, so limited liability companies, limited partnerships, and then as the protection trust, and where you land in this scale depends on your risk profile, your profession, the asset classes that you own, for example like single family, multi-family, commercial, where you own them at, the states you own them in, Texas, Nevada, California. Then we look at your total unprotected net worth, and then we look at this holistically and then start creating plans based upon where you’re currently at and then your growth and what you’re investing in. So I want you and your listeners to think about winter. So when it comes to asset protection, like I mentioned, we have different layers. That first entry layer is your base layer. It’s the foundation, and it sits on your skin. This is the LLC and insurance. This layer is generally when you’re just starting out. You have no unit, zero to three units or properties. Your net worth is generally going to be around below 250,000 nets. Then as you grow and you add more assets and you hit that four-unit spot, you’re investing in probably multiple states with different LLCs in different states, your net worth has probably hit around 500,000 to 700,000 nets, you want a mid-layer, which is usually going to be a little bit thicker. It’s generally going to be made out of Merino wool or for you ladies a cardigan, and this is your management company. We personally use limited partnerships for this management company, that mid-layer. I broke those two layers down the LLCs and the limited partnership on BiggerPockets Rookie in great detail, but that mid-layer limited partnership will be owning all those LLCs. So this way, you only maintain one tax filing at the end of the year. Then when you hit around one million net worth, you want an outer shell layer. This is your waterproof layer. This is like we’re going out skiing, we’re in Siberia or somewhere really cold for some reason. This keeps you nice and dry and warm when the weather is really bad. This is your doomsday lawsuit protection layer. This is your asset protection trust. We’re going to be spending a lot of the time on later on talking about these today, but by layering, you’re now more flexible. You can adjust and make yourself more comfortable. Now, for all these layers to work, I want you to think about this acronym, ECCC. These are the four things that must be true. So one, your plan has to be considered effective. Two, you’re going to want to control your plan and your assets. Three, you’re going to want reasonable and sustainable cost, and then four, you need to worry about compliance. It can’t be too difficult for you and your IRS CPA to figure out how to make this compliant with the IRS. So as you go through and evaluate how good an asset protection plan is, just remember that acronym, ECCC, effectiveness, control, cost, and compliance.
Rob: Okay. So let’s unpack this a little bit because for me and for a lot of the people that we talk to that are just getting started out, a lot of people seem to get very wrapped up in an LLC and often associate LLCs with both legal protection and taxes. I get a lot of people that are like, “Oh, do I need an LLC to file taxes as my business?” So could you share a little bit of the journey of someone that’s investing when they would start with an LLC? Then I think you briefly touched on this, but at what one would then take the next step to get, I guess, into that next level, which I think you said LLP?
Brian: Yeah, the limited partnership or a management company. Yeah. So the LLC, the Limited Liability Company, it’s that first layer. It’s basically asset protection 101 along with insurance. So the entry level base layer that most of us are all going to be familiar with and I think a lot of people spend a lot of time talking about is this LLC. That’s going to be holding your real estate and your risky assets. Anything that has a key or needs insurance or can go boom, these all go into an LLC. So we know about LLCs. People hear about partly the effectiveness of them, but there’s some things that we’re just not told about them, and I think it’s really important to understand these three big misconceptions of the lack of effectiveness on LLCs to then understand the reason for the next layers as you grow. So once you move from zero to three units and you’re getting into probably four units, about 500,000 of unprotected net assets or more, you’re going to start accumulating a lot of LLCs. So we need to start cleaning these things up for your accounting system so you’re not being nickel and dime on all these K1 filings, but also, one of the big issues with LLCs is that the courts now have a tendency to disregard single member LLCs. So when your corporate veil is pierced, it’s not very effective. Remember, that’s one of the most important things. We are looking for an effective plan, meaning it needs to work when you’re in courts, and CPAs tend to set up LLCs as disregarded entities for tax purposes. That’s really great for taxes, but it’s really bad for lawsuits. What being disregarded means is that the IRS is not taxing your business separate from you. It passes through to you personally, and because of this, they’re basically worthless for asset protection or lawsuit protection because that liability also passes through to you, but don’t get me wrong. I still use LLCs but at that base layer entry protection, and then we add the next layers up as we need to as you and your assets and your wealth grow. So that would be that limited partnership. Eventually, you want those LLCs to be owned not by you, but by that limited partnership. Then as those taxes pass through to that limited partnership because they’re disregarded, you only have one tax filing, but now you’re getting the protection from the limited partnership. The other two big misconceptions about the LLCs is just where do you even set these dang things up in? Do you go to Wyoming, Delaware, Nevada, Texas? You hear about all these states and it’s technically called charging order chasing. So they’re chasing different states’ laws. The problem here is that this is not creating a business like Dave and I or Rob and I going in and selling widgets. We’re holding real estate and LLCs as a holding company. So you can’t really go and buy another state’s beneficial laws and bring them to another state that you have no jurisdictional connection to. So if I own, for example, real estate in California and Ohio and Washington, and then I go stuff them all in a Wyoming LLC, I can’t take Wyoming law with me to one of those other states because there’s no jurisdictional connection there. The damage that you’re going to be getting sued from is going to be from where the injury is at, where the lawsuit is coming from, where the property’s at, where the person’s at. So a lot of people have this misconception that I’m going to go buy another state’s more beneficial law so I’m just going to go use a Wyoming LLC without understanding I can’t just take these other state laws with me to where I’m actually getting sued.
David: You mentioned two things I want to point out. The first is that when it comes to these legal entities, at least the way I see it, is you’ve got protection in case you’re sued or something like that, and then you’ve got tax purposes. So they function in this dual role and you highlighted how that can become confusing. So I’m going to ask you in a second if you could maybe give us a summary of how to understand them as they function in those two roles. Then the other one was you mentioned that you can pierce the corporate veil, and we just kept going. Can you explain to people that this misguided understanding that an LLC is a iron tight if you have it in LLC, you get sued, they can’t get anything outside of it, it’s actually not the way that it works in the legal system?
Brian: Yeah, absolutely. Let’s start with that one. I think you just need to pay attention to the first word, first letter, limited. I mean, they just tell you straight out in the name, “This is limited protection,” and what piercing and the corporate veil means is there’s certain ways that we go through and say, “Okay. This LLC is not an actual business. It’s an extension of you personally.” So because of that, that’s where we’re piercing that limited liability veil and now holding you personally liable. A couple of the easiest ways to pierce this veil is, one, just the nature of real estate. All right? We use LLCs and business entities as holding companies. We don’t operate out of those LLCs. You generally use an operating company. So when I’m trying to pierce through that LLC, the number one argument that we use that would work nine times out of 10 is saying, “Well, Your Honor, this is just a holding company. This isn’t actually a business. It does nothing but hold this company for David or for Rob. So this is actually just an extension of themselves.” That argument in itself will win nine times out of 10. Then the next ones we look at is funding issues. How is the LL-
David: Well, it’s true, right?
David: I mean, isn’t that why most of us are using an LLC is I just want to stick a property in it and I don’t really do anything else other than that?
Brian: Absolutely, and that’s the thing that you don’t want to do is operate out of the holding company because now, if you’re going to be getting sued through your business operations, now the whole point of separating out the asset from the operation defeats the whole purpose of what you just set up the LLC for. So that’s why people need to realize the nature of real estate and investing in real estate is completely different than taking the same analogy of we’re going to go create a business and sell widgets because our widget factory actually has a business to it. Our real estate LLC that’s a holding company has no business connected to it. It’s just holding the real estate for us and then we operate it out of something else. Then it goes into funding issues. A lot of people don’t realize that one of the biggest ways to pierce an LLC is just bad money management, funding the LLC incorrectly, bad accounting, co-mingling assets, which would be I got paid from the renter, it goes into my business account connected to my LLC, and then I go buy groceries out of that business account on the LLC versus paying yourself first. So those three right there beyond the list of a lot of other why LLCs get pierced very easily. The next question was charging orders. What a charging order is is just saying, “We’re trying to stop what damages can come to you and hold it just in the LLC itself.” So the charge that you’re going to get from a court stops at the LLCs and doesn’t bleed into you, the owner or manager of that LLC. Every state is going to be different on how strong those charging orders are going to be. Some suck. Some are horrible like California. Some are very strong like Wyoming or Arizona and Florida. So at that base layer LLC, we’re not chasing charging orders. What we’re doing is creating LLCs at the state the asset is at. That second layer, it comes to becoming important of where we create that limited partnership at, which I generally use Arizona for the limited partnership just because they have a specific statute that we like to play off of, but other than that, I don’t think chasing charging orders or chasing states with beneficial laws is that important at LLC level because you have no jurisdictional connection there. Then taxwise, the third part of your question, taxwise, realize asset is not tax planning and tax mitigation. We’re protecting your assets. So it’s going to be tax neutral. Your tax, we need to talk to your CPA and coordinate with your CPA. Your CPA and wealth manager is going to be where your tax mitigation strategy comes through. So it’s the three of us talking together, the attorney, the CPA, and the wealth manager of saying, “Well, first, we need to protect the assets,” because if you get sued and lose your assets, your CPA and your wealth manager have nothing to do tax mitigation strategies on. So the first advice is protect the assets as strong as you can. Then the next part is talk to your CPA and your wealth managers to then accelerate tax mitigation strategies as aggressively as you want.
Rob: I think that this is probably the part of the show where everybody’s hitting that share button and sending it to their partner and they’re like, “Oh, my God! The LLC isn’t enough,” and they’re all like, “Oh, we’ve been told wrong.” So now that we know that LLCs aren’t really quite bulletproof, I mean, you mentioned also pairing that with a good insurance to, I guess, level out some or to mitigate a bit. Then I think I’m still, if you could unpack a little bit on the limited liability protection or the LLP.
Brian: The limited partnership?
Brian: Yeah, what it is or?
Rob: Yeah, yeah, because I think you mentioned here that the LLP could somewhat function as like a management group for the LLC.
Brian: That’s exactly. So really, you’re using a family limited partnership at that second layer. When you use them for asset protection, they’re just called an asset management limited partnership. All right? So they’re like LLCs and they also have some charging order protection. I like them better at that second layer because limited partnership have a delineation between a managing partner called the GP, the general partner, and the minority partner who does not. So think of it like a split personality. We like having both a general partner interest and a limited partner interest, and we use that limited partner as a starting point for our clients, as that holding company or that management company because it can hold all of those LLCs that you’re creating so all those K1s will flow directly through that limited partnership, and then there’s just a one page attachment of a 1065 that your CPA will file. Now, you only have one tax return versus some of my clients have 30 LLCs with hundreds of properties, thousands of properties all over the place. The great thing is we can segregate out those properties and then have all those K1s flow under the management company. So it’s still very easy accounting, just one tax filing. Then the other benefit here is that people don’t realize is, one, limited partnerships are perpetual, whereas other states, they have an annual report on filing LLCs. Privacy, though I’m not a big component of anonymity and privacy because once you get sued, privacy goes out the door, but partnerships statutorily are private to where the name party, the GP is not named by the state on there. So you have a statutorily privacy built in and limited partnerships by themselves cannot be disregarded entities by nature. So there’s statutorily a lot of really strong builtin mechanisms and mechanics that are just stronger than an LLC. So some people do the wrong thing of saying, “Okay. I have my base layer LLCs at the bottom.” They layer up by adding another LLC like a Wyoming LLC. That’s the wrong next layer. Really, it should be a limited partnership because then we can come in and attach the asset protection trust to own that limited partnership not you.
Rob: Great. Okay. So obviously, there are a lot of moving parts with setting up, establishing, forming, evolving your business. So there are obviously going to be several different types of lawyer attorney roles in this. So I would imagine you’re an asset protection lawyer and that would be … What you do would be a little different than what a business lawyer who’s just setting up the business does or do you do at all as an asset protection attorney? Is there a difference between different people in this field, different, I guess, niches in this field?
Brian: Yeah. That’s a great question. I related to, I think, a good analogy is look at it as like medical doctors. They all go in a medical school, but they all have different specialties. So sometimes you’re going to go to your general family doctor, but you wouldn’t say, “Okay. You have a brain aneurysm.” “Hey, doc. Cut my brain open.” You’re going to go to a brain surgeon. You’re going to go find a specialist in that. So your real estate attorney is going to be focusing on what? Real estate deals, closing your deals, and doing the paperwork for that. Your business attorney is going to be focusing on the business aspect internally of your business. They’re generally not going to know as the nuances of asset protection. Generally, what you’ll find is their knowledge stops at the LLC level of protection to where I’m not going to go in and do your real estate closing for you, that’s not my job. I’m going to create the buckets that we’re going to be transferring title and holding all of those assets in. So I’m making sure that we set up the protection system fine. Your business attorney should do their job helping you and advising you on the internal running of your business and contracts. Your real estate attorney should be focusing on what their job is, successfully closing the deals that you’re getting, and then we just all communicate together depending on whatever the deal is.
David: I was going to ask you, Brian, if you had to sum up how a newbie could understand when it comes to these legal entities, how they protect you in case of a lawsuit as well as how they save you money in taxes, can you just give us a brief understanding of how they work in those two roles?
Brian: Yeah. At the base layer, LLCs really work as smoke screen and as a financial deterrent. So they’re good for little things like grandma slips and falls, breaks her hip. Pizza guy slips on ice, breaks his arm. You hit somebody in your car, it used to be it can help for that, but now you’re seeing radically excess damage awards, even just in fender benders and people getting … I had one client call that said, “Oh, I got on a fender bender. We were both taken away in an ambulance. I don’t remember much. What can I do to protect my assets?” I’m like, “Well, you know you’re possibly getting sued now so we have to walk a very fine line, but if you’re being carried away in an ambulance, even if it’s a fender bender, expect this lawsuit is going to probably run to be expensive in damages.” So the LLCs, like I said, they’re good as deterrents. So if you think about a leg, what you’re doing is with an LLC cutting off one leg of the plaintiff’s attorney suing you because you’re trying to make it harder for them and more expensive for them to collect damages on you because law firms are what? Businesses. Businesses have profit lines. So if I’m going to sue you for $100,000, I have to make sure that when I get the settlement from the case or a judgment, I didn’t overspend and break even. We have to create a profit. So each layer cuts off more legs of the chair to where then the chair is unstable and it’s either going to be too costly to push the case forward so they’ll take the insurance coverage or a settlement or in certain big cases like I have, I was talking about off screen with you guys, we have that California client, who’s a doctor, who owns a Jersey property, rented it out to a gang member, didn’t know, didn’t know he was a gang member. There was a fight that broke out. Guns were pulled. Someone was shot and killed. Who’s was getting sued? Mr. Deep Pockets, white coat investor here with the rental property for negligence and wrongful death. Would insurance and an LLC hold up and protect you in that case? No, because whoever’s suing you has a war chest and now they’re going after millions of dollars for lost earnings and wrongful death. That’s where a stronger protection needs to come into play, and that’s where very strong asset protection trust come in to protect you because in those type of cases where you have a doomsday lawsuit and you’re going to potentially lose everything, we have to be able to what’s called break a bridge and move your equity out of a US jurisdiction to protect your assets, and that’s where the different layers really come in depending on, and strength comes in. It just depends on the type of lawsuit.
Rob: So effectively, if I’m hearing this correctly, we’re trying to bog people down in the actual legal flow. So LLCs, there’s going to be a lot of paperwork that you have to mitigate through or go through as someone that’s in this lawsuit. So that can already be costly, but then to then start going into that next layer of the LLP and having to go through all of that, it just takes more time and expense for the other party that’s trying to take legal action. Is that about right?
Brian: Yeah. That sounds about right. Then the final layer, the asset protection trust. If you’re using, for example, a bridge trust, a very strong asset protection trust, we can break domestic compliance, meaning move the equity to an offshore account to where no judge can actually reach that money legally, and then that generally, once the party suing you sees that a foreign trust is in play at that point, they’ll just go away because it’s just too difficult. We can break through all of that when we talk about trust and why it’s so strong, but the ultimate deterrent is saying, “Even if you win that $10 million judgment against me, I’m uncollectable.” Really, what we’re trying to do is make sure in a doomsday scenario, you’re going to lose this lawsuit. You’re going to lose bad and you’re going to probably lose most of your wealth. We want to be able to make sure you’re not collectable legally.
Rob: Yeah. So let’s dive into it a little bit because I want to know a little bit more about trust. I actually, not too long ago, set up a family trust and I was under the impression, “Hey, is that it? Am I good to go? Is that all I need to do here?” Are there different types of trusts just like there are LLCs and LLPs and all that kind of stuff? Is there a whole branch of trusts out there that a lot of people don’t know about?
Brian: That’s a great question, and it’s absolutely true. A lot of people have this misconception that trust our trust, “Well, I have a trust so I’m good to go,” and it’s not. It’s like Baskin-Robbins, 31 flavors. It’s all ice cream, but there’s different types of ice cream. So asset protection trusts are that final layer of your planning. Like I said, it’s that full bad weather outer shell layer, but it’s the heart and soul of the system. So trusts have been the longest lasting entity of all entities, and you can sculpt them to fit however you want them to fit or they can morph it as you need them without dealing with funding issues that you see with LLCs and business entities that we talked about before that can generally get them pierced. So I just love trusts, and then having a trust at the very top of your planning is just very powerful and so is picking the right place to actually set these things up in. So to keep with my Baskin-Robbins theory, the standard 101 trust that everybody’s familiar with, Rob, that you mentioned that came from the ’60s is the family revocable living trust. So trusts don’t die. So when you do and you actually funded your trust by transferring ownership and title to it, you don’t have to go through the courts and probate, and that changed the landscape of estate planning, which is not asset protection planning. That’s just estate planning to avoid courts and probate. Then you also have land trust, which I’m sure some of your listeners have heard other people talk about for real estate. They hold your real estate and the land, and then you connect those to an LLC, but land trusts don’t have any protection in and of themselves. They’re only as strong as the LLC that they’re connected to. So land trusts are just a privacy mechanism. They’re not a protection mechanism. Then from here, you have higher levels of trust that are called asset protection trusts. If you guys don’t mind, this is where I think that we can really spend a lot of time breaking these three concepts down of an offshore, domestic, and then a hybrid because then I think after this you and your listeners will probably know 99% more and all the attorneys out there just on asset protection trust.
Rob: No, I don’t mind at all. In fact, I would very much welcome it. What about you, Dave?
David: Yeah. I don’t think you can ever have too much of this information. I mean, there is a stage in your career where you’re listening to this and thinking, “Well, this doesn’t apply to me. I’m trying to get my first property or my second property,” but the thing with real estate is it doesn’t grow in a linear way. It grows exponentially. You get a property, you get a second one, you start to think, “Holy cow!” This happens all the time. One property made me more wealth in a year than all the money that I made at my full-time job after I was taxed. This paradigm shift starts to happen where you realize gaining assets is how you grow wealth, and I’ve been banging this drum for a long time. I think people are finally starting to listen to me, which is nice, but there is a massive problem with inflation going on in our country. We are devaluing our currency, and in that environment, you can feel like you are getting wealthy because you’re saving money, but you’re really not. Your money is losing massive amounts of value every year it sits there. So you almost have to be investing just to breakeven. Just to stay where you want to be you have to be taking action. I really believe more and more people are going to start to figure this out, and you, BiggerPockets fans, you heard it first, right? So you had an advantage, but you’re going to see that we’re not likely heading to a crash in the real estate market. It’s just going to get hotter as wealthier people start putting their money there to protect it from inflation. When that happens, there’s always vultures that will circle because it’s easier to go and take your money than it is to make their own. I think what Brian’s talking about, which is beautiful, is this is how you make it harder to take your money, right? When you were talking about how we set up these foreign trusts and different ways to make it difficult, it made me think about I believe it was World War I. Actually, I should know this. I’m sorry that I don’t, but when the Russians pulled the Germans into invading Russia and they just kept sucking them deeper and deeper and deeper into Russian territory and their supply lines got stretched out and then winter hit. It was very, very difficult to go after the Russian so they finally gave up and said, “I don’t want it.” Well, you could think about your wealth in that same way that as people are coming after it, the more obstacles that you put in their way and the longer of a process you make them spend, the more money they have to spend on their lawyers to try to get to it. They’re either not going to fight that war or they’re going to quit once they start. So this is a very thing to be learning, especially if someone really likes real estate because it’s going to become more and more important in the future.
Brian: Absolutely. I like to piggyback off of that. I’ll use my ex brother-in-law as an example, a guy who couldn’t rub two pennies together and then decided he was going to go do a flip and fix, and then that turned into a short-term rental, that turned into a sixplex, that turned into him specking out a couple homes, and three years’ worth of time, he has over a million dollars worth of assets and unprotected net worth just by listening. I’m like, “Hey, go listen to BiggerPockets. Go listen to these guys. Start learning this stuff, but execute it. Don’t just read it and get stuck in analysis paralysis.” He actually did. The next thing you know, from the not being able to rub two pennies together, it’s amazing how fast real estate can accelerate wealth. So the whole point of this is if you’re just starting out, it’s good to know here’s the foundation, but you need to know the direction that you’re heading because then you’re going to set up like most of my clients come in like a complete mess. They’re going to come in, “I own 15 properties, either all in my name in all these different states,” or “I have a Wyoming LLC,” or one was, what, four days ago, “I have a Montana LLC.” I don’t know why Montana. “I have 15 properties in all these different states in a Montana LLC that I don’t live in. I have no connection to Montana, whatsoever. So what can you do for me?” I’m like, “Okay. Well, now we’re going to have to disassemble all of this craziness that you did, but let’s make this flow and let’s put you in a stronger jurisdiction for this trust.” To get into the strength of these three different trusts, but going offshore as particularly the Cook Islands does is they have this beautiful thing that’s called statutory nonrecognition. All right? What this means is that if you have a judgment against you in the United States, and you took it down to the Cook Islands. US judgment there is completely worthless. It literally has no value whatsoever because it has seven very strong statutory standards. So if somebody wants to sue your trust that you create in the Cook Islands, they’d have to start the case all over from scratch there. The person suing you would have to prove their case beyond a reasonable doubt. So that’s the murder standard, the 99% sure standard, not the US civil case 51% called a preponderance of the evidence like, “Oh, maybe, I don’t know, but sure. Let’s give them their money.” You’re talking about the highest legal standard in the world. You can’t get a contingency fee attorney to represent you there because they’re not allowed down there. It’s unethical like it used to be here in the US, but that got changed in the ’60s because lawyers now control our legal system and they want lawsuits to get started so they can get bigger pay days. The claim, meaning the lawsuit, is not amendable. So once you file your complaint, that’s it. Once you start sending out discovery and you start digging around and poking around, you can’t just say, “Oh, okay. Well, we’re going to now change what we’re suing you about and sue you for this even though we didn’t know we were suing you for that. So we’re going to amend our complaint.” You can’t do that down there. The person suing is going to have to front the entire court cost plus flying a judge from New Zealand, and you can’t take your US attorneys with you down there. The kicker here with this is if you lose, you pay. So 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 of the winner. So if you get sued by somebody for something completely bogus, I mean like a frivolous lawsuit and you spend $200,000 defending yourself on legal fees and then the judge decides, “Hey, you know what? This is ridiculous. I’m throwing this case out,” you’re still out $200,000. They’re not going to be getting the bill for it because that’s discouraged in the US because that will discourage people suing other people. Then there’s only a one year statute of limitations. So while you have now the most effective, remember the four things I told you to think about, effectiveness, cost, control, compliance, while you have the most effective trusts in the world by far, I mean, statutory nonrecognition, right? Doesn’t get stronger than that. Those other three factors, if you’re going to go purely foreign, it falls short because now costs are going to be very high like $50,000 to $75,000 to set up a purely foreign trust. You’re going to be out of control of your assets, and the IRS compliance is insane. You’re talking about full disclosures, FACTA disclosures, full trust disclosures. So for most people, that’s a hard pill to swallow. So that’s why we rarely, rarely ever see going purely foreign. What most people then default to is going domestic. It’s cheaper to start up. You’re going to be in control of your assets. The problem is they suck on effectiveness and they’re starting to get pierced because we have what’s called a constitution. Article four section one, full faith and credit clause, meaning if I own a California piece of property and I have a Nevada LLC, I can’t take that judgment, go to Nevada, and Nevada say, “Hey, sorry. We’re not going to exercise that judgment,” they legally have to adhere to that judgment and even litigate the case because you have to give the full faith and credit to other states’ judgements and recognitions. Then you have crazy judges nowadays that are just, what is it, litigating from the bench. So you have radical judges now not following case law and statutes and using their super power called public authority, public policy. So the way you combat this is you want to take the best of both worlds. You create what’s called a hybrid trust or a bridge trust, and you take an offshore Cook Islands trust, and you domesticate it through the IRS. Now, it’s cheaper to start up. It’s cheaper to maintain. You have no IRS disclosures, whatsoever. While that trust is domestic, okay, the maintenance is going to be easier, but I have that strength in my back pocket. So if I ever do get sued and, for example, there’s this Louisiana case that happened some time in September I think it was. There was a guy Airbnbing his property. The short-term renter like a lot of people party we know in short-term rentals. All right? Guy got plowed, decided to do a head dive off the back patio and landed in the shallow pond, broke his neck, became a quadriplegic. Sued the land owner of the property and got an 11 million judgment out of him because he was a dumb drunk. So what this means is if you’re that land owner getting sued and you had a bridge trust, we can do what’s called a demand on the assets. Break the IRS compliance and now your trust is what it is. It’s purely foreign. Now, we have that strength in our back pocket because we set it up beforehand. So now, even when you lose that 11 million lawsuit, I’ve moved your equity, I’ve moved your money, you’re safe. Now, we can either have them just completely walk away, which most people do nine times out of 10 or the case is settled for a penny on the dollar. Once the case settles, you redomesticate that trust and it’s back to being purely domestic again.
Rob: So I actually have a question about this because a lot of interesting stuff here. So let’s just say in the case where you have a trust, let’s say the hybrid trust, for example, and that holds all your real estate and you have an $11 million judgment. So that judgment is against your trust, which is more protected because it’s offshore. Do you personally just as a person walk in the streets of America, have any sort of liability at all or any kind of charging order or any money that you would be on hook for from that $11 million?
Brian: So what would happen is at that point, removing the equity and removing you as the trustee. So the likelihood of them following you, so we’ve had to break over 300 bridges and move a bunch of equity offshore. We’ve never had or seen over decades a client actually follow us down to the Cook Islands because it’s just too daunting of a task if you go through those seven prongs that they’d have to do. The only people who ever go down there is the IRS, the government, the man who can print money and has infinite amount of resources, and all they do is lose down there. So do you have liability walking around? Yes. Can you run from that? No. Do you have a judgment against you, a valid judgment? Yes, but we did is make it legally to where you’re not collectable on that judgment because the offshore trustee is going to say, “Sorry, this is the Cook Islands. We don’t recognize any country’s court orders or judgements. You have to sue us here,” and that’s out of your control. This is the US versus Grant case to where a guy stiffed the IRS for 36 million, stuffed it in a Cook Island’s lawsuit, had a heart attack, died. The IRS came after the wife for the back taxes and the money three times and three times lost, and then tried to hold her in civil contempt of court and throw her in jail until the money came back and the court said, “Listen. It’s not her choice.” Now at this point, the offshore trustee is the one in control saying, “No. Sorry. You don’t get access to this because it’s under duress,” and she even tried to instruct the offshore trustee to give the money back and they kept saying no because it’s under duress. The court said three times to the prosecutors, “We can’t hold her in civil contempt of court because it’s no longer in her control.” So that’s how effective and strong that becomes. So you’re walking around with a liability, but it’s the ultimate settlement, big red button that works that you have in your toolbox. So generally, before you go down that route, you’re going to be settling the case because the attorneys at that point realize a foreign trust is in play. It just is up to me, the attorney, to decide when I’m going to use that option or not because of the ultimate negotiating factor.
David: So I have two questions about that. The first would be, how quickly can you get this set up? Is this something where you’re like, “Oh, boy! I’m in trouble. I can’t get it moved over before a judgment is issued”? Number two, approximately how much money should someone plan to set aside to do this technique?
Brian: That’s a good question. So it generally takes about 30 days to set up and transfer all the assets over.
David: That’s fast.
Brian: Ideally, you want to set this up, yeah, it’s pretty quick. Ideally, you want to set this stuff up before you even have a whiff that you’re going to get sued because realize states have look back periods. The most extreme is California, a 10-year look back period. Other states have two-year look back periods, meaning you set this up and then if you get sued next year, someone’s going to look and say, “Okay. Well, this is a fraudulent transfer. Unwind it because you had a reasonable expectation within this timeframe that you could have been sued.” Anyways, that’s irrelevant because you’re not getting sued, but that’s the argument that’s going to be played. So you want to set these up like any defense system before a lawsuit happens. Okay. Once a lawsuit happens, you’re starting to go too far down the rabbit hole, and you’re really limiting the options that we have, and if you have a big lawsuit against you already and you come to me, I’m either going to have to exempt that lawsuit or just go purely foreign, and that’s going to be very expensive. Purely foreign, like I said, you’re generally talking like 45,000 to 75,000 to set up plus 10,000 to $15,000 a year to maintain. That’s why we don’t use them very much and the IRS compliances. It’s just too much. That’s why you go the hybrid option to where, generally, with a bridge trust with a limited partnership, you’re talking about 29,000 to set up plus around $2,600 to maintain a year, and all of this is asset protection. So it’s a tax write off. The profile that generally fits a bridge trust set up is you have about one million, like I said, of unprotected net. You probably have four to six or more real estate properties in different states. Either you’re a pure real estate, 100% into real estate investing at this time or you have some other type of high risk career like you’re a medical doctor investing in real estate or a lawyer, CPA, something that has more profile besides just the real estate itself because I think people don’t realize how much bad things can happen in real estate even if you’re the most wonderful landlord in the world. You can’t control mold issues. There’s a lot of things that are just … Renting out to the wrong person, a fight, breaking, someone dying. There’s just so many things that go out of your realm of control. That’s what these trusts are for. I tell people think of it like a pie chart. There’s three quadrants, the things you know, the things you don’t know, and the things you don’t know that you don’t know. Most bad things happen in the third quadrants and that’s where most people own their assets, the things that I don’t know that I don’t know. If I know something, I already know the answer. If I don’t know something but I know Dave or Rob knows the answer, I’m going to be like, “Hey, Dave. Hey, Rob. What’s the answer to this?” and you’ll tell me, but if I don’t know that I don’t know something, I don’t even know how to ask the question. So the idea is shrink that portion of the pie as much as possible, but create protection around yourself so that when something does blow up in that quadrant, we’re safe.
Rob: Okay. So I think for offshore, you mentioned that it’s expensive 45 to 55,000. Can you also break down that for, I think, for the domestic side? I don’t know if I missed that particular number. Then that’s one that you said if I remember correctly, offshore, highest level of protection, most expensive, domestic, more affordable, but not as much protection, and hybrid, basically marries the best, right? So what would be the cost on those side of things?
Brian: Yeah. So the domestic side, the purely domestic side, on average you see a domestic trust fall in the realms of I would say 9,000 to 12,000 to set up, and probably around a thousand dollars a year to maintain. Again, the weakness with that is purely US domestic. So there’s no escape option. So just realize that’s the weakness of it. Okay? We’re having a lot of case law come down of judges, even in states that have asset protection statutes and self-settle spendthrift statutes just completely ignoring those statutes now or you have states like California that don’t have self-settle spendthrift legislation and people running off to Nevada, for example, to create an out of state asset protection trust. Well, the courts in California came down in Kilker versus Stillman in 2012 and said, “Ah, ah, ah, not anymore. We’re not going to allow you to do this anymore. We’re not recognizing out-of-state asset protection trust,” or people run off to create Delaware statutory trust. Well, California doesn’t recognize them anymore. So you have very thin lines of what states recognize them and what states don’t. So when you combine where your assets are, where you’re resident of, where the potential lawsuits come in, that really weakens the effectiveness of anything purely domestic. So yeah, I can spend $12,000 on a domestic trust, but I feel like we’re buying false sense of security at that point, and then that’s where the domestic comes in in-between, but what you’re doing, like you mentioned, Rob, is taking the best of both, the pure strength of the foreign, the ease and simplicity from tax purposes of the domestic, combining them together and then that falls within a half price range around $29,000.
Rob: So okay. Yeah. I mean, it’s still up there, but I mean, I think now hearing the benefits of it, I mean, it starts to make a lot of sense, especially when you do have a very quickly growing portfolio. I also wanted to get some clarity on something you said about the, I guess, if you solely do real estate, then the trust is going to help you, and then if you’re in another high risk job like a doctor or CPA, a podcaster, YouTuber, in those instances as well, if you got sued personally out in the streets here or whatever for something you said or something you did, you would still have protection on all of your assets, even if what you’re getting sued for isn’t necessarily real estate-related. Does that make sense?
Brian: Correct. Yeah, absolutely, because your assets are out of your personal name. They’re owned in the proper buckets, the real estates and the LLCs. You have the management company as a second layer. Your trust really owns everything. So since everything’s out of your name, you’re going to get sued personally, but they’re going to have to break into the system. Let’s say they do pierce veils, and they do get into that system. Everything’s unwinding. You’re in your doomsday health situation right now. You had a glass of wine at date night with your spouse and you hit somebody with your car and then they died. That’s just a general negligence on you personally. They’re coming into your trust to try to get it. That’s where those layers come into play, and then that trust disconnects does a unilateral with demand on the assets and it’s gone. So even though you have a judgment against you personally, your asset protection trust is what’s going to be owning everything, and then that offshore trustee eventually is what’s going to be the ultimate door in that judgment’s face. It’s just a matter of having the layer set up, again, keyword, beforehand. So that’s where when we create the trust and everything before you’re getting sued, now I have that option to break the bridge or that compliance because it’s in my toolbox already, just like you’re hiring a contractor to build your house. I want to make sure the contractor has all the tools and knows how to use them and not saying, “Oh, I’m going to go put the roof on and I need to get a crane, but I don’t know how to use a crane.” So you need the pieces and the tools in place beforehand.
Rob: Okay. Okay. See, this is, truly, this is all mind-blowing stuff for me. So the only other real question around the trusts, well, no, actually, I have a thousand more questions, but the one big one that I think a lot of people are probably wondering at home is once you start getting into … Let’s say you put your property in an LLC or you did a quick claim into an LLC or you did anything in that world, refinancing and doing a cash out refi and moving those deeds over, that can already start getting tricky at that level. So my question is once you completely move your properties into your trusts, how does that affect doing any kind of financing in the states? Does that get murky at all or is it the same straightforward process?
Brian: That’s a great question, and I would say it depends on the type of trust that you use. We specifically use a grantor’s trust so there’s no murkiness, and banks and lenders prefer to see a grantor’s trust because you are the one that’s maintaining the control of the management of your assets. There’s other types of trust that you create that you hear some people saying, “Well, I have an asset protection trust in Nevada, and it’s so difficult to get lending through or using it for bankers.” Well, that’s because it’s not a grantor’s trust. So it just depends on the type of trust that you’re using at the end of the day.
Rob: So if it’s owned in a foreign, well, I guess, it’s hybrid, but if it’s owned in this hybrid thing, it doesn’t necessarily have really bad ramifications on going to a bank and saying, “Hey, okay.”
Brian: Not at all because it would just be a foreign grantor’s trust. The hybrid trust is a grantor’s trust, and all that the banks will see is a domesticated US grantor’s trust, and that’s all that they’re going to see, and it’s just like everything else. Another form of a grantor’s trust is your revocable living trust. That’s another self-settled created for you by you. So they’re familiar with that. If you start going away from grantor’s trust, then you’re going to start seeing banks or lenders saying, “Oh, I really don’t understand what this is.” So like the basic KISS principle, keep it simple, stupid, it’s the same thing that you want to apply when you start creating asset protection plans. Some attorneys that don’t do this at higher levels create very convoluted message for clients who just becomes a nightmare for what you’re saying lending purposes or even tax accounting purposes, and then they just stop using it and unwinding what they did, and they just completely wasted a bunch of money because the system was so convoluted and so difficult to use and maintain that is completely contrary to what you want to do. So again, remember the acronym, ECCC. You want to make sure you can maintain your compliance and the costs are going to be easy to maintain. So that acronym, just everything that you do, realize if it looks convoluted as corona probably be convoluted to you, so you want to really simplify what you create. Just make sure it’s strong and has different multiple layers.
Rob: Okay. I want to pivot a little bit here, not super left field, but a question here because, obviously, in today, in 2022, today’s world, cryptocurrency and digital real estate, NFTs, and other things, that’s obviously a really growing industry at the moment. So I’m curious, when you start factoring in technologies like crypto and blockchain, is there anything you can speak to with protecting that through any kind of trust as well?
Brian: Yeah. Absolutely. I almost feel like that’s a whole another episode in and of itself, but just remember that the IRS defines cryptocurrencies as a property. Okay? It’s very, very important for your listeners to understand this, and what this means is that it can be targeted with legal action and you are legally required to disclose that you own it, and how much of it you own and where. So people have this misunderstanding that because you purchased this cryptocurrency and that is private, that they think that it can’t be traced or that it’s inherently protection in and of itself, meaning that simply owning your cryptocurrency is asset protection in and of itself, and that you’re hiding wealth. This is the farthest thing from the truth. If you ever are subjected to a money judgment and you’re brought into debtors court, because the US classifies your crypto as a property, you’re legally required to disclose it, and like any property, it can be frozen and ceased. So if you don’t disclose it, you’re lying to the court, you just come into perjury and perjury means people go to jail. So what we need to do is assign your exchanges and your wallets out of your name and into your asset protection plan to protect those assets. Now, this is where blockchain technology and the law is really getting fun. So there are things called blockchain trust that we’re developing right now ourselves using the same concepts as the blockchain that’s powering crypto. That then can be used to create these unique trust. You can make changes and amendments to these trust that they’re going to be recorded in the blockchain, and then it’s going to be forever verifiable. We can build our pre-builtin triggers into a blockchain trust that allow the trust to alter its structure based on certain events that are happening. For example, a trust can convert into an irrevocable asset protection trust if you’re ever in a lawsuit or it can become an irrevocable income-only trust before a beneficiary ever needs to apply for Medicaid. So the blockchain trust, based off of all this new technology, is really starting to accelerate the trust that we’re using for the future, but this is all in beta development now, but I expect to see big changes starting to happen there.
Rob: Awesome, man. Well, we’ll bring you on for a whole another deep dive on that. I guess a general disclaimer for everybody out there, David and I will never ask you to send us crypto. We’ll never ask you to contact us on WhatsApp. So if you’re on the BiggerPockets YouTube channel, you’re going to see a lot of BiggerPockets-branded accounts at our scanners that are saying, “Hit me up on WhatsApp, send me Forex trading.” I don’t really know what it is these days. It’s not true. We’re never going to ask for that.
David: That is a good point. Every month, I get a new fake account where they will have some variation of my screen name. Do we call them screen names? Did I just go back to AOL days right now on the podcast? What do you call your social media name?
Rob: Well, it’s a handle now. The cool kids say handle, your handle.
David: All right. So they’ll copy some variation of my handle. They’ll leave off the E at the end of Green or they’ll turn the E into a C so it doesn’t look like it. They’ll copy all my pictures and then they’ll say, “Hey, send me your bank account information. I want to give you some money,” and I get so many people that say, “Hey, I thought I was sending you my bank account. I sent it to a scammer.” I was like, “Why would you send it to me? That’s a terrible idea,” but yeah. Please be very careful with these DMs. Brian, I think now would be a good time to transition over to the fire round section of the show. Did you have anything that you wanted to say before we move on?
Brian: No, I’m ready for the fire round.
Speaker 4: It’s time for the fire round.
David: Awesome. Okay. This is a segment of the show where Rob and I will fire questions at you and we will see how you would reply in your best response where you fire them back. So what is the biggest myth surrounding LLCs?
Brian: Yeah. So the big myth right now is this wonderful word called anonymity like, “Let’s go create an anonymous Wyoming LLC and we can completely ghost and disappear lawsuits.” That’s not how the legal system works, but I get this call probably three times a day. Sorry. I’m cracking up as I say it, but it amazes me that this isn’t the general train of thought that we’re creating this anonymous Wyoming or Delaware LLCs. Now, I don’t have to show up in court and I can never be sued or discovered.
David: It reminds me of the person who can figure out somebody’s MySpace password and then they think they’re a hacker. They’re like, “Oh, I’m in.” They think that that’s what computer hacking is, right? It’s the same type of thing like, “If we just fight an anonymous thing,” or there’s this one move that they know about that nobody else knows that can win them the fight. It’s the same type of an idea, but yeah, when you go to court, they unpack everything. There’s no five-finger death punch.
Rob: I’m going to say you can definitely think TikTok for that. I mean, TikTok is 15 to 32nd viral videos that are like, “This hack is going to save you millions of dollars in a lawsuit, Wyoming LLC,” and then it’s like, “Oh, gosh!”
Brian: Well, and that’s where this comes from because you have so many promoters, and even attorneys and CPAs have no idea about this because they just take a continuing legal education course and then just realize, “I can use this for everybody,” and cast a big net and don’t realize, “Well, what really happens and plays out in court because I am a trial lawyer by trade?” It’s like, “Well, you do get this thing called you’re getting a service so that personal agent of service that’s legally required to be attached to that Wyoming or Delaware LLC, their still job is to be like, ‘Hey, Rob. Guess what, man? You just got served. Here’s your lawsuit. Now go get a lawyer and show up in court.'” Well, there’s no more anonymity at that point. So now you got to show up in court and the judge is going to say, “Hey, you’re going to potentially have a judgment against you. So here’s this great thing called an asset declaration list. Write everything down that you own, and if you don’t and you don’t disclose everything, now you’re going to commit perjury on the court and go to jail.” So once you get sued, anonymity goes completely out the door. Now, if you want to hide your assets, you’re the weak link on that because you’re going to be the one going to jail. So just realize anonymity is a private seat mechanism, not a lawsuit ghosting mechanism.
Rob: All right. Awesome. Let’s move on to the next one here. How will investors use blockchain in the near future?
Brian: I think investors are going to be … From the legal side or contract side?
Rob: Yeah, yeah, smart contracts, anything in that side of things.
Brian: Yeah. So I would go and look at what is a company. I’m not pumping any one specific currency or anything like that, but at ADA, they’re really getting into … What it’s called? Cardano? Yeah, ADA is Cardano. They’re really getting into the smart contract play. So realize, blockchain is about transferring a title. So now, you’re going to have these smart contracts and it’s going to be really easy, clear title. So the importance of that even in the legal field is you can’t go in and manipulate a piece of evidence and document because it’s all going to be transparently there in the blockchain, and you can’t just go in and start manipulating these agreements.
David: All right. Next question has to do with building your team. So in the book that I, David, wrote, Long Distance Real Estate Investing, I talked about the core four. You want a deal finder, a property manager, a contractor, and a lender. You have those four pieces, you can invest anywhere. Outside of those pieces, Brian, who do you think investors need on their team?
Brian: Yeah, and that’s a great book there. I actually wrote that your book is a really good book.
David: So you’re the one that read it. I’ve been looking for you.
Brian: It’s me. It’s me. I should get a little courteous like, “Hey, man,” but I bought all the covers. So I just gave them out as gifts, but anyways, no, the key pieces beyond those I would say become friends with your CPA. Really, you should be talking quarterly to your CPA to take better advantage of your tech strategies. Your asset protection attorney, before you buy something, before you sell something or if you have a sniff in the wind that you did something wrong and are about to get sued. So we need those two to talk and we need to talk to each other and your wealth manager because we need to protect what you have. Your CPA needs to be able to file the proper tax forms and your wealth manager needs to be able to do whatever tax mitigation strategies that you want in place. So I think those are the three key pieces of your investment world that you need to be constantly talking to. Some people are afraid to talk to the lawyers. Some people don’t realize you should be talking to your CPA probably quarterly to create proper plans on how to write a lot of stuff off, and then your wealth managers take your CPA’s job to a whole another accelerated level. So if you really want to accelerate wealth, get in with your wealth manager, tell them your strategies, tell them how aggressive you want to be, and let them do their magic.
Rob: Totally agree, man. I mean, that’s a whole nother level on the Avengers, right? I call mine Airbnb Avengers. I think David calls his the dream teamers, core four. This is now your financial, I don’t know. We don’t have to think of the name for them now, but yeah. I mean, teams in every aspect of your business, I guess, there’s no limit to the amount of teams that you can have when you’re trying to scale and protect your assets. So thanks for answering that. So I’m going to be re-listening to this podcast myself. Just I’m going to digest it and then come back and then relisten with a whole new, I mean, I feel like I’ve just evolved to the next level of what it takes to really know your business. So Brian, for you, are there any final takeaways or anything you want to leave the viewers or the listeners with as we close out?
Brian: Yeah. I would just say in the realm of what we’ve been talking about, it’s too late after you’re getting sued. So you got to think about this stuff beforehand and then just layer it up and structure it as you go. In the investment side of things, I would just say don’t get stuck in analysis paralysis. Eventually, you got to just jump in and kick your arms and feet around and realize, “Let’s float then swim.”
Rob: Where can people find out more about you, Brian?
Brian: Yeah. They can jump on my website, www.btblegal.com. I have it set up more as an educational resource with a bunch of case law, frequently asked questions, video content because I’d rather have you be educated to ask better questions when you are shopping around versus just coming in at a blank slate or you can just email me, [email protected] I generally do a one-hour free consultation, whether we’re right match or not. I’d rather, again, just have you have a long, educated opinion and then take that and see what other people have to say.
Rob: Announcing that you’re about to get all the hours on your calendar filled out for the next year, I think.
David: I’ll say, you know this really is-
Rob: David, what about you, man?
David: You know this really is a trial attorney because you’re referring to case law. The second I hear that I’m like, “Okay. That’s actually a person who is going to end up being in court and knows this from a practical standpoint not just a theoretical standpoint.” I always notice that when I worked in law enforcement. Those of us that were in court testifying had to pay a lot more attention to the case law involved in those that never did anything.
Brian: Well, and I would say that’s a great thing to ask people when you’re vetting your attorney is asking for some case law because most of them won’t send it.
David: That’s exactly right. So the 15-second clip on TikTok person probably doesn’t have case law. I think that’s an awesome litmus test. All right. Well, thank you, Brian.
Rob: I think that’s it.
Brian: I’m thinking about creating a case law TikTok.
Rob: Hey man, you could probably go viral with that, Brian. You want to hit up TikTok after-
David: I think that’s also how you know if someone’s like-
Rob: David, where can people find you?
David: You could find me at DavidGreene24. Find me on Instagram, find me on Facebook, find me on Twitter and LinkedIn. I’m going to be making a TikTok for the David Greene team. I’m just trying to figure out who the right person is to make that thing. Brandon Turner has warned me very, very carefully, “Do not get sucked into TikTok.” It’s like putting on the ring in Lord of the Rings where it just can pull you right in. So I’m going to be making content for TikTok, but not ever actually watching it because I’ve been warned of the dangers of it.
Rob: Oh, it’s true. They know me well. They know me well. You can find me on TikTok, @robuilto, Instagram, Robuilt, on YouTube, @robuilt as well. Remember, everybody, it’s David Greene with an E24. It’s not DavidCream25. We will never ask you for crypto.
David: All right. Well, thank you very much, Brian. This has been a fantastic show, probably more practical knowledge and insight than almost anywhere else you could get. I mean, this is just like the consultation that you’re going to give to somebody. Many people would pay money to get this information. So thank you very much for coming and bringing it to our audience. We appreciate you. I think Rob and I will now be having another talk where we say, “Oh, my God! Do we need to do anything differently? What could happen here? Do we want to go to Monaco? Do we want to go to Switzerland? What’s the key going to be?” but we appreciate you, man.
Brian: We’ll be in touch.
Rob: We’ll be in touch.
David: This is David Greene for Rob robuilto Abasolo.
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