Brian Bradley: How to Keep Your Assets Safe

On today's Episode we explore the vital role of asset protection in real estate investing with expert Brian Bradley. Uncover the strategies for creating legal barriers and layers of protection that every entrepreneur and investor ABSOLUTELY NEEDS to know to shield their investments and personal assets from potential lawsuits. Brian guides us through understanding the legal system, using trusts, LLCs, and various other mechanisms to fortify your portfolio against unforeseen challenges. Welcome Brian, to The Gould Mine...

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•  What's up gold miners. Today. We welcome Brian Bradley Esquire to the program with an exposed net worth around 0 to like $250,000 of exposed net worth um. So you're you're really a greenhorn you're just starting out. Don't invest you're so new at this you're going to screw a lot of stuff up and you're going to probably have more exposure to potential lawsuits then as you started doing things right later on down the line Brian is an asset protection attorney who has made it his life's mission to protect investors and business owners alike from predators from taking their hard-earned assets. Incorporation Brian has a unique perspective. He spent the first 10 years of his law career as a class action litigator. It was in that decade that Brian came to realize just how broken the system truly is here in the United States and now instead of helping these sue happy predatory plaintiffs. Brian has made it his life's mission to educate you on how to protect your assets. From them. We start off the episode by Brian discussing the different layers of asset protection how to start protecting your assets and how to scale your different layers of asset protection as you scale your portfolio and your net worth. Later on. In the episode we really get into the Weeds on the different types of trust offshore trust hybrid trust as well as his management company strategy which is very interesting and finally to conclude the episode. We spent some time discussing llc's and we bust some myths surrounding the protections that llc's provide might be surprised to hear how little they actually protect. You and Brian goes into this. In detail. I honestly could have spent three more hours with Brian and we will for sure be inviting him back for at least another episode or two. He is a wealth of knowledge and I cannot wait whether you are just a business owner. You own zero real estate you own a ton of real estate. You're getting started in your real estate. Investing Journey you have been investing for 20 30 years I honestly believe sincerely believe that everyone stands to gain something from this episode so without further Ado let's welcome to the show Brian Bradley Brian welcome to the gold mine thanks tin yeah. Now this is uh. This is great man I've obviously uh been following you for a little bit of time here and and for the audience back at home right. Now they they're they're tuning in why should they stick around what do they stand to game from from listening to this episode yeah. So one I I find it interesting right like we listen to a lot of podcasts or shows or seminars or we're learning how to invest where to invest what to buy how to accumulate how to get more metrics data and all this stuff. But at the end of the day we got to keep it right and so what are we keeping it. We can accumulate as much as we want. Then we have a massive lawsuit and it's like I don't know if I can swear on this or not. So I I'll not do that um. But you know it's like escrit it. I'm getting sued and I'm losing everything now and I spent so long. Gathering I didn't think about the one thing I need to do protect myself against predatory lawsuits and the system and the man and uh you know world that's crumbling and because I mean because it's. It's a negative side of things right like we don't think about our own deaths until we're about to die. That's why most people don't even have estate plans and then like oh shoot. Uncle Johnny died and he had no trust. What do we do so thing in the world of accumulating assets and wealth. Like okay we're accumulating we're accumulating oh my God. I'm getting sued now what do I do and we'll break down like that situation in in a little bit later or so. I think what we're going to get out of is just the realization uh we got to do things beforehand. There's a lot of BSS being spelled out there because a lot of people aren't even attorneys talking about this or just promoters and salesman um. So we're going to mythbust a bunch of stuff on this episode um and like I said you know we're living in a crazy messed up legal system and we're investing in it and we're living in it. So we need to understand how to protect ourselves. Dude I'm excited. I'm really excited because this is something that I'm actually pretty like passionate about I have seen a lot of people lose pretty PR much everything um because of because of predatory lawsuits like you just said and um in fact the real estate brokerage that I was a part of was a part of this massive predatory. Uh lawsuit. This guy had file filed 23 class action lawsuits and uh we were the uh The Brokerage that I was at was number 24 you know and uh some like bdnc um no man. It's common I used to before I got into ask of protection. I was one of the top trial lawyers in the nation and my specialty was PLS work employment and labor law and I was known as like constantly suing hospitals and class action lawsuits because it was just easy money and so like it made me feel dirty you know but at the end of the day like when you get hired into a firm and like all right hey you know. Here's. This person stretch the facts if we can't bi SL action and an employment and labor law especially if you own a business or you're a doctor and you you know you own your own practice. There's a lot of liability not just on the medical malpractice side of things. But because being a business owner property owner you know you got a lot of risk and liability. There and harassment discrimination wage and hour claims um any of those can wipe you out so. I'm assuming that today we're gonna we're going to talk about not just Real Estate Investors and how to protect themselves. But you also mentioned like corporate protection because look a lot of Real Estate. Investors own their own businesses too right and so everything just kind of gets melded together and that's actually one thing that been thinking about recently is like hey. I need to start figuring for me too. I'm like I need to start figuring this out because like you know I have three businesses and then like investment properties and all these things but like if someone really wants to like well. This is my show I can say whatever I want someone wants to you right like they're they're gonna. They're GNA figure out. We can go there all right. We go there all right beautiful. I'm not one of those boring attorneys like I'm a good. I'm a fun person to talk to so all right all right good.
•  So so no that's true right because you're you're you're an entrepreneur like we're hustling we're bustling. We're making companies. We're making deals some of them will work. Some of them aren't going to work and then what happens generally. Somebody gets pissed off a deal falls apart which is generally normal right when you're when you're trying to create something and then somebody's going to soo the other person and then you have personal assets on the line. You have other Investments that are there a lot of times. It's like yes real estate is risky your business. You're creating is risky and it's it's the Partnerships that follow part where a lot of this comes from yeah and so I think like the the big thing we need to first to understand is like even. Define this term right like what is asset protection because I find most people don't even understand what that is and what it's not and so I think that would probably be a great launching point of just what what is this term mean that of this topic. We're even talking about yeah. So let's go there like what what like let's just start at the basics yeah so what is asset protection. Right asset protection is simp placing a legal barrier between your assets and your potential creditor right like the person trying to sue you and take your stuff before it's needed and put before like big capital letters and like make it blink a bunch of times because that's really where it is like. It's before it's needed and that's it. It's just a barrier like a safe for your gold or your guns or your valuables and anything of value like stuff that we were talking about like rental properties business interest stock accounts. Brokerage accounts cryptocurrencies. Syndication shares like you know corporate vested shares. You want to put all that behind the legal barrier and into the proper bucket out of your personal name before you're getting sued. So it's not easily reached and so it is not hiding money or moving assets to not pay or avoid paying taxes. You know that's illegal you're going to be taxed on your worldwide income you know if you're a US resident. So I hear people like why not just go to you know like some island in the Caribbean and you know put your money. There might it doesn't work that you're still going to have to pay taxes on it. You're going to have to do the foreign disclosures um and we'll get into that probably a little bit later when we talked about like tax havs and scams and fraud and all of that fun stuff. And it's also it is not Estate Planning and we'll break that down when we talk about the world of trust um so you're like your revocable living trust. It will not protect you it's not designed to. It's designed to come to effect when you die to decide who gets what where when how and why and avoid probate. That's it so has nothing to do with avoiding creditors why you're living from taking all of your stuff and so the really two big takeaways right. Now um is that asset protection is not to avoid paying taxes and it has to be done before you're being sued and I talk about the timing of creating an asset protection plan um and fraud in my book a lot. Overexposed because that's literally the the critical element and Stage for an asset protection plan to even work and be effective and if you want I can break it down through this really cool case like kind of talks about two or if you feel like that's too like geeky. Just let me know no please do I like that sounds awesome like real case studies sound great yeah so so it's demonstrated beautifully in a 2010 case called SEC vers solo and here's a situation where Miss solo so the wife's trust was attacked by the SEC to to collect her husband's fines from engaging in a fraudulent trading scheme. So essentially just like bad person doing bad things right. They're the villain in the story. The court found that he made a fraudulent transfer after the SEC judgment was entered against him so what he did was. He assigned the assets over to his wife's trust to protect them after the Judgment was entered against him. So this is just straight up. No bueno right. Like this is just fraud. Mr solo was held in contempt of Courts but 100% of the assets were protected and I use this case a lot to demonstrate two things. At the same time. One is just the power of an offshore trust which we're going to recap later on and break that down when I go into the layers of asset protection. But Mr solo was blatantly wrong. You know like again. He's the bad guy of the story but his assets were safe. The SEC couldn't get to them so the trust actually worked that's Point number one but what sucks is that he was held in contempt of court but why right like what did he do wrong. The second point is that that case goes to the timing of setting up the protection plan. He transferred the assets too late. He was late to the game. He did this after the fact after the lawsuit after the judgment and that was fraud and that opened up the door for the court to hold him in civil contempt of court. So the big takeaway is the planning has to be set up before the lawsuit. Not after the fact you have no idea of how many people call me after they hear me talk on some show or some like investment summon and say oh hey I heard you talk on blah blah blah blah. Blah I need an asset protection plan. I'm getting sued and I'm like then you probably didn't listen very well to what I talked about because I literally just broke it down like in plain English that this has to be done before you're getting sued man. You know like come on listening comprehension skills 101 um but th those are the most important things so it's like because otherwise I have to exempt the lawsuit and then plan for the future or leave enough money of a protected judgment out and then protect the rest. And it's just like people don't want to hear that because it doesn't you know coincide with the story they want to tell themselves right right right so. Let's back up here for a second because there's like so much that I want to cover but let's just start from like there's lot of listeners to the show right and so like let's just let's just say. The average listener has a couple of single family properties uh maybe they're not super sophisticated so they don't even own them in llc's. They probably just have them under their name like what are the what are the base level like base levels of exposure that someone who just owns a bunch of properties in their name kind of Faces in in the you know in the face of of like a lawsuit. Like like they the tenant sues them or whatever yeah. I mean a tenant just suing them. I mean I wouldn't. It depends on what the lawsuit is about right but if it's just some disgruntled tenant because you're getting kicked out and evicted your asset protection plan. Like that you have insurance for things like that. You know like ass of protection really comes into play when you know you got negligence on your own life like hitting somebody with your car running them over um. Then you got also loss of income and earning capacity which like skyrockets a lawsuit from well. The lawsuit of Damages was only like a couple 100,000 or million dollars but now I can't work forever. So now I want loss earning capacity and like mental anguish and all of this and now you have like a $50 million J right um so you can do with like rental properties with like fires like oh my God like I literally had a couple days ago um a potential client call in and say hey I need to create an asset protection plan um. I own a mixed use commercial property and you know he lives in a different state you know this property of the rental is in California and an eonon fire burnt down and the person. The renter inside died and so now the estate's going to come after him and sue him and it's like all right tell me more about the case and it ended up being well unbeknownst to him. There was an illegal grow that they started using the property for and so they the um fire investigation. They believe is like yes. He did have uh smoke detector alarms but they did not go off so that's where the argument is going to be of like negligent wrongful death because you had neglected the fire um alarm system. You know to go off in case something happens well because there wasn't uh. This will probably work out in his favor because they probably disconnected them and pulled the batteries out because they were doing an illegal grow. So that's where the investigation is going there well I mean. It's like things like that where you're like I'm a doctor living in like Jersey you know like I don't I'm renting out to this person and then they convert your rental into an illegal grow or a meth house. Or you know. It turns out to be renting out to a gang banger and there's a dry by someone gets shot and killed um. Like there's this insane stuff that I have to deal with all the time where people call like my God. Baby I have no idea the phone call. I just got off the call with um. So it's it's not the pizza guy slipping and falling right and breaking his arm. It's your negligence of your own life. It's deals falling apart. It's um you know an electric outlet where there are contractors coming in and they're doing some work and then next thing you know. Something was done wrong electrically and then they electrocuted it yeah that so and I'm sure that you hear some crazy like it sounds. Like you you get you get surged with like the like gr stories yeah yeah. No I get and it's just like my clients are also like more High net worth people. So we I have deal with a lot more um real estate which then brings in a lot more problems and issues. So I see I just see a lot more on a constant basis um or like deals that are falling apart and we're talking about like hundred million doll deals and everybody's pissed off suing everybody so that's for the asset protection structures especially if you're a venture capitalist or you're you know very entrepreneurial. You you got to make realize like not. Every deal is always going to be a home home run. So Al so to go to like your your yeah base level. That's right. So I was like where am I circling this back to so base base level right.
•  I want you. I want to tell it through like a story of of layering right like. Let's just say we're going to go out. We're going to go out and we're going to go skiing right um. So let's think about winter when it comes to acid protection. We have different layers that we're going to put on just like when we're going to go dress outside to go on our ski trip. That first entry layer is your base layer. You know that thin shirt that sits on your skin. This isn't LLC and insurance. This is when you're just starting out investing like you're probably going to have like zero to three properties or zero to three like three or four units um with an exposed net worth around zero to like $250,000 of exposed net worth um. So you're you're really a green horn you're just starting out and if people are saying well. I don't want to do a setup. Yet I want to just get a couple properties first then do. It don't invest to be quite honest like your startup cost of your base. Llc's and your insurance is going to go into that because you're so new at this you're going to screw a lot of stuff up and you're going to probably have more exposure to potential lawsuits then as you start doing things right later on down the line um. So it's just like starting any business start with a business structure an entity to at least limit some liability and then we grow in scale from there and so as we're growing and we're adding more assets right. We hit that like four unit to like eight unit mark. We're investing probably in multiple. States um. We have multiple llc's now our net worth. That's exposed is around 500 to 700,000. Net. We're going to want a mid layer which is usually a little bit thicker right like generally for men. It's going to be like a Marin oal sweatshirt or a card again for you ladies. This is a management company. We use limited Partnerships for this mid layer um. Some people will use. Llc's for that I can break down the reasons for why that for that later on or just pick it up in my book. It's the you know detail of the Weeds on that and then you hit around that 1 million net worth. Mark um. That's when we want that outer shell waterproof layer. This is going to keep you nice and dry and warm when the weather is really bad. This is your dunesday layer. Your lo you know your asset protection trust and for us is that hybrid Bridge trust and the reason that comes into effect around one million of exposed assets is that's kind of where I find our client profile sits because if you think about it for most people it takes almost entire working lifetime to generate $1 million of equity and assets and by the time they're like you're like 40 to 50 one lawsuit that's going to take out your entire net worth. You don't have enough years to make it up anymore so it's lost um. It's different than a client coming to me with 10 or 20 million yeah. They can take a $1.25 million. You know judgment against them. It's going a little hurt. You know it's not going to be a knockout below or like that lower floating shot to the ribs um it'll hurt them but they can keep going and fighting uh for most of you with that 1 million net mark. Mark that lost you're is not something you're going recover from um but by layering right we're now more flexible. You can adjust and make yourself more comfortable. I you can take the layers off the inner layer off the middle layer off the outer layer off and the same thing with our asset protection plan. We want to be flexible so if you're just starting out you're just getting your feet wet LLC Insurance. Then we scale as you scale got it and and asset you know and when I've researched this before and the way that it's been explained to me is exactly the way that you just explained it which is that there's like a layering process to all of this and so the way that you just broke it down was kind of like by net worth or by like number of properties. The Doomsday let's talk about the Doomsday like the top layer real quick yeah. So you had mentioned some offshore trusts and and things of that nature so like what is what does that look like what what are the what are the Doomsday protections here yeah. So the Doomsday protection at the end of the day is an offshore trust right but then we don't want to go purely off Shore because it's just way overkill for 99.9% of all people they're expensive as heck to create um. There's a lot of IRS disclosures and mandatory disclosures and they're expensive to maintain. So we hybrid them. We create an offshore trust and then we have the domesticated through the IRS. Why do we why do we do this right um. I think this is probably then like a good spot to explain even the world of trust and then the different types of trust and then people will understand why we hybrid it out. Even does that sound kind of like a good way to go about it. Let's do that yes yeah all right yeah. So we're we're bad weather protection layer. Right doomsday. Situation um trust are great because they can morph as we need them without dealing with funding issues that you generally see with llc's and other business. Enti entities. That will eventually get them pierced and so I think of the world of trust like Baskin Robbins. Okay trust comes in lots of different flavors and types just like ice cream. Right 31 Flavors the standard 101 Trust that everybody's familiar with from the 60s is the family revocable living trust like the estate plan right. The Family Estate plan trust don't die so that when you do and you actually funded the trust and transferred ownership of your like you know home into the you know entitled into it. Then you avoid probate and um the the estate plan just changed the landscape of estate plan but they're not as a protection trust. Then you have land trust for Real Estate if you're investing in real estate. You probably hear that all the time on a lot of shows that you're listening to on how to invest in real estate land trust you connect them to llc's 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 which we'll talk about llc's probably later on um. They're just so land. Trusts are just a privacy mechanism. They're not a protection mechanism which is probably a shock to most people um and that's where the llc's fall apart like when the llc's Fall Apart part your land trust is no other strength for you to come in and protect you. It's just saying all right. I know you own this property. Now. We're going to use a land trust so that your name's not on you know the ownership of it. It'll be the land trust which will be private um but there's not going to be any charging order protection to them. Whatsoever. Then you hear people talking about like Delaware and Wyoming statutory trusts. They're more of a tax mitigation strategy to avoid being franchise. T that's it you know um. There's there's really nothing more special about them um than your land trust except just I don't want to pay 8 $800 and then if you get sued then just as strong as the LLC that is connected to and then again we're spending a lot of money on something that's not going to work um. From here you have higher levels of trust. These are called asset protection trust and this is where the fun really starts to happen. Asset protection. Trust came into effect in the 1980s and asset protection trusts are called self-settled spendthrift trust so they're created for you by you as your own beneficiary and they have really strong spendthrift. Provisions in them and what spendthrift Provisions are is there. Provisions that allow you to protect your assets from creditors like the people trying to sue you and that's the actual teeth behind the trust. You don't have these in revocable living trusts like your estate plan. That's why they're not there to protect you you know they they can't protect you. So it is actually a very different type of trust just like chocolate and vanilla. Both ice cream but just different types and flavors of ice cream and so it comes to the question of then irrevocability. Versus revocability right um because your revocable living trust is revocable your estate plan. All asset protection trusts are always going to be irrevocable um and the question is like what does irrevocable mean and a lot of confusion get set into that irrevocable means that any action once it's done it can't be undone so for example like once we jump off a bridge right. We're off. We're not. We're not undoing that unless we have a bungee right like then. There's an exception to that so at a starting point creating an irrevocable trust is just like jumping off of a bridge. Once it's created we can't revoke it his purpose and its terms are fixed and no no changes are allowed. But at at the same time this isn't always the case we can attach um. Certain exceptions to Clauses in there is called um like a like a bungee like a bungee cord. It's called flexible irrevocability so what we're doing is attaching like a bungee core to portions of the trust so that we can go in and modify them later and the the courts are completely fine with this. The importance of irrevocability is just so that a judge can't come in and say hey I know that you have this trust. I'm ordering you to revoke it or I'm going to hold you in sing contemp of Court well. If the trust is irrevocable. They can't do that now we're starting to get some protection in there even against crazy judges trying to take your stuff interesting so yeah and so this is this kind of comes into the effect of like the hybrid trust um just to sum it down real quick the strongest trust and the First Trust in the world that was created was the offshore cook Island trust created in 1984. Um there's a lot of statutory hurdles which makes it the strongest trust in the world even today again because they don't recognize any court orders or judgments in the world. The problem is it's super expensive to create like 50,000 if you're going to get it done right and then about10 to1 122,000 a year to maintain and then you have to do all the disclosures and disclose everything that's in there um way overkill for about 99.9% of all. Then we had the domestic option came about 10 years later the problem with the domestic option yeah. It's cheaper right you know uh but and you don't have to do the IRS disclosures. The issue is they're just not very effective like almost every state. Now that has them we're all getting pierced because you're having judges just not recog you know using their power of public policy appointment and saying I'm just not recognizing that statute and law based on public policy and they're piercing the trust and so what we want to do and it was done 30 Years Ago by my partner Douglas L Mill is create the offshore trust have the IRS classified as a domestic trust. So now we have the strength and power offshore domesticated so we don't have to do the IRS disclosures and now you have a nice domesticated offshore trust and it's like a hybrid car right.
•  We're combining the best of both for a better product. So when you say p because uh you know when I hear pierce the trust I I think like piercing the corporate veil right and there's like certain things that yeah that happen there. So so so because theoretically right like when we talk in theory like I think high level. It's easy for people to understand like okay the trust protect the asset but like what is it specifically about the way that these trusts are formed or like the the language or whatever that makes them so hard to to pierce yeah. So what's so strong about the foreign trust right. Not just not the H like the hybrid one is the foreign Trust but the Cook Islands has what's called statutory non-recognition of any court orders judgments in the world including the US so they just don't recognize them so to where in the US right we have the Constitution. We have the full faith in credit clause meaning even if I get sueded in another state and a judgment gets brought to you know a state that I'm at the states have to recognize every other State's court orders or judgments. You can't just run from a judgment. They still have to be enforceable um. That's you know the benefit of our our us Constitution well all right. How do we fix this. So we fix this by just establishing our trust in a country where the offshore trustee can say. I don't care that you have that US court order like that Nevada judgment against them. This isn't enforceable here you have to sue us here in the Cook Islands. I'm taking your court order and throwing in the trash come down here and sue us and so that's the power of it for one got it and then two like in the Cook Islands. You just have so many statutory hurdles for someone to jump through like the person suing you. There's a one-year statute of limitations I mean by the time someone even realizes you have an offshore component to your trust. You've already struck out. You know it's too late to even establish the lawsuit. There the case has to be proved by the criminal standard Beyond A Reasonable Doubt. The like 99.9% sure standard um. There's no contingency fee attorneys allow down there. Like there are in the US if you lose you pay which is like one of the single worst things that we have here. The US has created part of all this problem. In these predatory lawyers you know and lawsuits is anybody can just try to sue anybody to get a Payday out of it and have all these frivolous lawsuits because they don't have to any up. They don't have to put any skin in the game to start a lawsuit and then they can start just like taking 60 100 Grand away from a person because it's cheaper to pay the settlement than it is to actually have to sit there and fight and prove your innocence yeah. So when you're weighting the cost in of all right how much is it going to cost me to fight this versus how much can I just pay him to leave me alone and go away. That's a cheaper outcome so let's just make him go away um. So you can't do that in the Cook Islands. So they have all these statutory hurdles that um prevents this the system that we we have now in the US and before you go down that route when you just tell the person suing you like hey. We have this offshore component to our trust if you don't go away I'm going to execute it. A smart attorney is going to see like even if I get this $10 million judgment against you. It's not going to be enforceable. I'm not going to be able to collect so the lawsuit generally is just going to get dism not dismissed. But they're just going to go away right away take insurance money because you're not collectible and law firms are like businesses at the end of the day. When I was doing a lot of plaintiff work I didn't just have to look up and say all right what can I potentially get as a Max judgment. I have to look at what are the assets that I'm going to be able to collect on and can I collect on them to get the money and then how much money do. I have to spend on trial and litigation. So it's a cost you know cost analysis of this and profit benefit. So if I have to spend more and then then what I'm going to get I'm not going to take the case or if I can get you know a big judgment. But there's nothing for me to be able to collect on. I can't take your case because I want to go out of business yeah. That makes a lot of sense so as as an attorney. So you're you're. It's. It's even if the even if the plaintiff wants to do it you know and they've got. The they've got the money or whatever um the attorney it's going to be hard. What you're saying is to like find an attorney that's even willing to play ball because they realize like at the end of the day they're probably not going to get much out well. Generally. What happened is they wouldn't know until they start like the plan will come in. I'll talk to them do you know an analysis. I'll start digging around and seeing like who are they who do you want to sue what assets can. They find that they have um it'll be hard to know they have an offshore component to their trust like that's not going to be revealed so what would happen is. They probably send like a demand letter or maybe like file the initial claim and then I we would just call them and say Hey you know listen. We have an offshore component to our trust. You know like you. I don't know anything about the merits of this case that you're saying and alleging but just to let you know even if you got a Max judgment. I'm just going to trigger an offshore component. So you'll never collect anything. I suggest you just go away 9.9 times out of 10. After that phone call they just go away because that attorney realizes you know like they literally are protected to the tenth and even if I have valid claim valid judgment. I'm never going to receive a penny from it at what point in your journey and maybe we can just talk net worth wise since you know. This probably applies to not just real estate investing at what point do you. Uh do you uh recommend someone do this offshore. Uh trust yeah the hybrid version. I recommend people do it when they get around 1.2 million of exposed net worth and what I mean by exposed net worth is um like the equity in your home is exposed unless you're in Florida or Texas right. They have a beautiful homestead exemption so we're not looking at the value of your home. I'm looking at the equity that you have in your home um your 401k and your IRAs I take out because those have great like 401ks have Federal exemptions to Thea. Almost every state has some level of exemptions to IRAs so we take those out of the equation so we're looking at equity in your home. Your personal brokerage accounts. Those are fully exposed and then like your. Investments that you have right like cash cash is easy and so a lot of people are stockpiling a lot of cash which is dangerous if it's just in your personal banking and checking. So people are selling a property having a million dollars in their checking account because they have no idea what to do. They couldn't find another deal. Now they're just sitting with insane amount of C liquid cash in their personal checking. God forbid you hit somebody with your car tomorrow you know um and then I'm looking at other Investments that you're doing you know syndications or real estate because then if you have rental properties. We're looking at Equity value. Of that. So I add all that together and I look at your risk exposure and your day job like are you a doctor a surgeon a lawyer some sort of professional um business owner. So what's your risk exposure. What's your exposed net worth and then kind of look at all that as a matrix and put it together and say you're at that like 1 million Mark with exposure in real estate and your profession. That's kind of where I would say you need that hybrid trust got it. Now you you touched on something here and I'm genuinely curious right so when you're involved in syndications or funds like I like I'm involved in in hotel syndications right so you know from a a gplp uh standpoint when you're involved in any sort of like uh any type of uh fund or investment like that the structured like that what what is the risk uh or exposure or are the like how would that how would that get exposed for example right like if a GP gets sued yeah like does the whole project go like are underexposure like they get tied up right like it can get tied up because then title is um painted right and then if even if you're investing it and then the whole project has a lean on it. Then all the investors in there are going to get pissed off because maybe people want to sell they can't um so when you're the sponsor like you know of syndications. You have an insane amount of risk and and especially if there starts becoming like leans on the property or um. I had this one project when I was living in Michigan um. It was like a $40 million apartment on the lake. Then we had to pay our. Client had to pay a bunch of like independent contractors and um the issue came up because the windows on the lake weren't put up to Hurricane. Level. Grade and people don't realize on Lake Michigan like the wind gets really really strong and so every time like a massive Windstorm would come up in Winter. It would just piercing water through all of the glass um and so ended up creating like a 20 billion. You know project issue and then um long story short. The sponsor of the deal on that the GP is going to be liable and then you have all of your other. You know smaller investors on the lp side who are going to start suing you for all of their loss of you know their damages and of the investment as well as if they wanted out of the project. Now that there's leans on the property and they can't get out of the project or it's getting tied up and this just could creat a massive legal mess. So if you're the sponsor you really need to make sure you have your asset protection structures in place and if you're if you're on the limited you know partner side of it. You can always put your percentage shares of the syndication into your own limited partnership and protect that because even though you wouldn't be getting sued from the project itself you can be getting sued from the negligence of your own life and that's an asset that can be used to as a judgment you know to have to sell to award to the plaintiff. So we can put those syndication shares assign them into a partnership and protect that and lock that down just like think of it like vested corporate shares right like you work for a nice big company. One of your benefits are like over time you get vested shares in the company right well as those best protect.
•  Them okay dude like we're going to need three hours or more. You know like this is I'm just like my head is spinning right now um. I'm I feel like I'm going to make you a regular on this show if you'll come on man. This is this is phenomenal. I've got so many questions for you um okay so one thing that you just said right now limited partners. So if you're listening at home right now and and Brian correct me if I'm wrong. But what I think you said is like as a limited partner. Yes you're not going to be exposed to the project. But if you are personally exposed in like another lawsuit. Then you could be forced to relinquish those shares to the plaintiff un unless you protect those shares through a like your own limited partnership. You said yeah yeah so think about it like when I talked about the layers of asset protection right like at the bottom think about like down up right um lowest level of protection. Llc's well llc's are used for what like we didn't talk about llc's yet you know we can do that either on this show or another one because like I'd beat the out of LC's um and that's one of the myth that we have to bust um. But risky assets like real estate directly go into llc's well when I'm when I'm investing in passively right like in the syndications well the syndication share for me is is as a passive investment so if I'm just investing on the lp side I don't have any direct risk in that so I don't need to have that in an LLC from risk exposure right like I would a rental property. So I don't need to put it into an LLC so when I'm layering this my my non-risky assets like stocks bonds. Intellectual property and passive syndication shares can go directly into my own management company which I would use a limited partnership for that okay. That's where those would that's where your your passive Investments would go so risky assets go in the bottom layers right LC's those float up to and are disregarded into your management company which would be your own personal limited partnership and the reason for that is as we're accumulating more right. I don't want you to have 10 20 k1s in tax violence. That's just insane right so like your CPA will like they'll be your new best friend. But um what I want you to do is have simple tax filing right have one K1 issued to you through the limited partnership and have all the other ones passively flow up into it. So that's how we simplify you from tax perspective and then there's a lot of cool other things which I don't want to like into the Weeds on here. But then we can add like a C Corp on the side of it to then push money into that so that you're paying you know cash flow L coming in push it into the C Corp unconnected to limit a partnership to pay at a lower 21% tax rate. Like that's where we start getting like really creative with it yeah and then on top of that limited partnership. We have the hybrid trust own it so you're managing your limited partnership and then your trust owns a limited partnership right just like think about it. The nature of limited partnership the gplp the GP is you when your own limited partnership you're the managing member what owns. It is not you that's your trust and then that's where the magic of protection comes into play. There's a lot of tricky cool things that's why we use limited Partnerships so when you hear people you're like oh why not use a Wyoming LLC or this because they're not designed to work like limited Partnerships. That's why when you see a lot of money coming in for deals and Investments you always see it coming through limited Partnerships in offshore trust because of the way the setups work together so and and to just dive a little bit further into the Weeds. On this management company yeah idea so my understanding is like okay. We're going to create a a a a comp a management company right and that management company is structured as a general partnership limited partnership and the the limited partnership owns stock in all of these different uh passive investment vehicles syndications or or all of the stuff are are part of the lp right and then the GP is owned by trust or like the GP is the trust so yeah. So so the GP is you the managing member so when you think about limited. Partnerships think of it like a circle okay and then you draw a line down the middle of it. I I always think of it like analogy of like a split personality right left brain right brain left. Brain GP is the managing member you're going to own like 1% of the limited partnership on the GP side and then if you're married your spouse will be the other 1% because you need two people in a partnership you and your spouse. If you don't have a spouse we're generally going to use another LLC just because you need another person all right. Then the other 98% own ership of that limited partnership is the actual ownership of it and that's on the lp side because that's the actual ownership. So the beautiful thing about limited Partnerships is this split distinction between managing members and owners. I want you to be the managing member so you can keep wheeling and dealing and buying and selling and doing whatever you want with all of your assets. But what I want to own. It is your. Trust and that's how we're distinguishing between management and ownership and so when the trust now owns on the lp side right ownership side. TR owns a limited partnership. Now we can do this beautiful thing was called it's called a unilateral withdrawal and demand and Arizona by Statute. It's the only state that allows limited Partnerships to do this but the trust now can say hey limited partnership you're being Su. This is a massive duress to us I demand my assets and I'm disconnecting from and then the sever the cord and then that's how the TR the magic of the trust owning. The limited partnership. Works gotcha okay that makes sense and and your your recommendation is that we do the limited partnership model as opposed to like just rolling all of those passive shares into an LLC because of the protections that are that that are unique to that limited partnership model correct yeah correct. That's the lay you C you theoretically can try to do it and I know some firms that do with the LLC and the reason they do is. They just don't work in the the world of trust. They don't understand them and so their model is lower level. Clients to what we service um and then most people refer them when they need the trust to us. And so they'll try to use llc's or Wyoming llc's to work as that management company. The issue is when you get sued every State's different right like I have to present that operating agreement to the judge and then the judge will determined if he agrees with your operating agreement or not and so when you get really crazy and creative with operating agreements and try to turn like an operating agreement of an LLC to like a limited partnership. A judge is going to sit you and be like son. This is not what these are for no you should have used a limited partnership you're opening up the door for fraud and having the operating agreement thrown out and then the whole system implodes so it just makes more sense to use the proper. The proper tool in the proper place right depending on what the client needs right like if you're simply saying I own one or two properties. I want you know one L LC to hold it one for like you know the the management company. I'm not going to really buy anymore. I'm not trying to grow anymore fine use another LLC but if you own a lot of different types of assets I have real estate. I have some passive syndications. I have my personal brokerage account. I have a risky job. I have 10 Properties or whatever yeah. Then we need to start using the right tool because we got to add the layers that are actually appropriate.
•  Yeah dude my mind is getting blown right. Now this is awesome let's go back to the syndication thing because selfishly I want to understand on the GP side of things uh if you're buying if you're the sponsor on a deal. Obviously you you're if you've got the bad boy car bouts whatever even if it's a down rate course loan. Like there's there's things that that that can happen um on like from a personal guarantee standpoint. However Yeah well yeah so yeah. What are what are some of the tricks of the trade that one can Implement if they are a sponsors in you know one or even lots of deals right like what are some what are some cool tricks and like the biggest blun ride of like what you kind of hit on is like the the personal guarantee and that's that's where I always tell people. I'm like it's going to be hard like have a lot of different lending options or sources to get to get money from and and try to avoid a personal guarantee of assets and never ever give a personal guarantee directly into the trust right because then think about it just like a divorce like oh I'm trying to I'm I'm married and I all my assets are Community. We accumulate all of our assets during the 10 20 years of our marriage and we had nothing um in the beginning. So everything is now deemed. Community Assets. Now. I want to divorce my wife. I want to put it in my asset protection trust. I don't want her to get a dime. Can I do that no hell no you can't do that because it's all Community you're going to determine or judge will what each one of you get. But you can't hide the assets for someone who has a legal right to it. When I give you like Danny you're my lender a personal guarantee on my house. I've now given you legal rights like you're my wife. Now. I've given you legal rights to it yeah. You know I mean there's no other like equate. The two to get like literally is is basically that Sim similar um Can an asset protection trust like an offshore trust or a hybrid trust help settle that yes it can um and we've done it. We've had um clients who gave a $75 million personal guarantee for a massive project that they were doing and then we were able to get it settled for $5 million because of the use of the hybrid truck um. It doesn't mean like it made it completely go away but it took it from 75 million to 5 million paid out over like 10 years right. So there's there's ways that we can use utilize the tools to negotiate because um doesn't mean we're not going to execute the trust. It just means it it. It might not work fully when you're personal guaranteeing but I'm going to make you fight like hell to get through it and that fight's going to be expensive. So the you're you're saying like though the same things the same asset protection strategy IES that you were talking about before. If you're deploying those or utilizing those as a Jeep. Like as a sponsor you you you can get you can stand a benefit from those protections. Regardless of whether or not you're okay yeah. The planning is not asset specific. Like I we would utilize the same structure um whether you're sponsoring a ma. A massive build project or you're a world renowned surgeon with like commercial property all over the place or your. Some of my favorite clients who use this are the firefighters and nurses and teachers who self-funded their retirement over the last 20 years and have like five or six rental properties and that's the rental you know that's their retirement of cash flowing property right there. Those are the ones I'm actually the most concerned for that need this stuff. Then you know the person that can afford to lose like 10 million. You know it's uh I'm I'm I'm retiring teacher and I'm a retired you know firefighter and uh self-funded my retirement so like you guys you can't lose anything because then you're never gonna getting it back. But it's the same. It's the same structure across the board okay. So let's spend some time there. Then the the people that have stand to lose a lot right so your your your recommendation is like hey um up to four properties. Andor like a million or like a a couple hundred thousand net worth um insurance and llc's are enough. Uh then what should get up to like that 500 to 750 Mark. Uh plus a couple more properties you want to add in um limited partnership model limit right um and then finally once we start getting into the the big leagues we're talking trusts. Hybrid trust offshore trust that sort of thing um correct yeah yeah okay and so like I would say people just need to realize why what's the limitation of llc's right because you always get this like well. I have my LLC like I'm I'm perfectly fine and I think that's one of the myth that people just um I'm not sure where this myth came to scale like just get a LLC and you'll be fine. I think it might have happened as podcasts became popular as learning and education resources and then you had a lot of salesmen and promoters going in and saying hey just get an LLC and confusing tort liability and law from business law and then not having many people that are actually attorneys working in the asset protection. World um on this and so if you got time I think that would be a good one to to kind of myth bust and break down or we can save it for another time. Let's do it let's do it yeah. So we're talking about like the first layer right and L LC's like this is just straight up asset protection 101 for anybody. Listening like this is just base base layer stuff. This is not Dracula Slayer all right um. So we're talking about that thin shirt. Sitting on your skin. We probably are very familiar with llc's right. We hear about people talking about them. They're going to be holding your real estate. They're holding companies holding risky assets so anything that has a key or anything that needs insurance on it or anything that can go boom and hurt somebody. They're going to go into llc's how many is just going to honestly depend on your profile and what you're investing in um. But there's a lot of confusion on where to set these up and you know when we're especially when we're dealing with real estate investment properties you know do. We go to Delaware Wyoming Texas Nevada and this is where we really need to break this down and do some Modern myth busting. I think you know what we're really talking about. Here is this fancy word called charging order protections and corporate bail. Piercing. You know big legal boring fancy words. But this is yeah. But it's such a big topic that I had to devote actually a lot of time to this. In my book and break down. You know the stories and topics through a lot of case law um. We have to remember that llc's began in the 70s with the goal of blending the elements of Corporations and Partnerships without the downside of double taxation. It's important to recognize also that asset protection was never the end goal of llc's so by Nature they just aren't the strongest strategy and they they tell they told us this like the legislators that create them straight up in their name right.
•  Like limited. They tell us like first word first letter like straight up. It's right in the name they're not hiding the ball. On this from us yeah um. They offer a limited veil of protection that Veil is better than nothing nothing meaning you own it in your personal name. But it's fragile and it can be pierced just think of it like that thin flimsy piece of fabric that covers the face of a bride on her wedding day. So when we set the limited liability companies up we have to keep that limitations in mind and it really comes down to an issue of just what are you holding and where are we holding it at and so let's say for example because I love picking on California um. It's one of my favorite states to pick on pick pick on us I I yeah well. I just I I I practiced for like 10 years as a trial lawyer out. There. Also so I just know how how messed up the system is but let's say. For example it's it's California real estate that you own and you're a California resident and you set up a Wyoming LLC and then you go and you hold a key piece of California real estate in this Wyoming LLC and you're paying California Franchise Tax on this out ofate. Wyoming LLC. What you've done is just convert your Wyoming LLC to a California LLC because you're doing business in the state of California you're paying the franchise tax in California. You have to at the end of the day right. There's not even any way to get around that but if you ever have a liability issue in California meaning a lawsuit. The judge in California is going to apply California law not Wyoming law and this is demonstrated in a recent 2023 Supreme Court case named mallerie vers Norfork where the Supreme Court upheld a Pennsylvania statute that forces companies to face litigation within the borders that is registered to do business in so let's repeat that right because it's really important and when lawyers and professors repeat something. I generally think is worth writing down or remembering because it's going to be on the test. At the end of the day. It forces companies to face litigation within the borders that is registered to do business in so this case now opens the door for other states to adopt similar registration requirements so state courts are permitted to exercise jurisdiction over registered borign corporations as are let's say holding your real estate just as if they're domestic corporations of that state and remember. We're legally required to record your out ofate LLC known as foreign entities and pay the franchise tax yeah. You don't just get to take why ding or Delaware. Tor and damage and personal injury laws with you do other states you can't just go and purchase another State's more beneficial laws yeah and this next distinction is actually even more important is the distinction between like Tor and personal injury liability with business law you see sadly what people do not realize is that real estate is different and they confuse business law and contract law with tort law and personal injury liability. We kind of touched upon it a little bit earlier when we're setting up businesses and creating contracts we can and we should include choice of law. Clauses right and venue Provisions. We see these in every contract saying you know like what state any potential claim or dispute can be broaden. It's in every single contract you've ever signed but when we're setting up a business like sell widgets right or or a product in a different state yeah. We can use Nevada or Delaware or Wyoming like any of those good charging order protection States and use those States choice of law Clauses and venue Provisions to govern here's like the big kicker right air quotes internal disputes and Affairs of the business and let's repeat that again right hit hit to govern internal disputes and Affairs of the business but again when it comes to real estate and llc's acting as holding companies for that rental property that is not a business when a person gets injured on your property and sues your LLC or they sue you for damages. Due to wrongful doings and negligence. You know another legal fancy word right. That's not a business dispute. That's a tort liability we're talking about wrongful acts and infringments on rights um so cases like Court. Liabilities do not relate to Internal Affairs or corporate governance matters so they're outside the entity so you really don't have any corporate veil protection. From that. So no litness test is going to exist if you know you call me and tell me is my veil going to be Pierce Brian. I don't know it's a case-by case basis but the seminal case on this is uh on. Veil piercing came from 1962 as Auckland Meat Company very you know very very famous case. Here here the California court of appeals listed out 20 reasons justifying piercing your Veil. The main five hitters are comingling of funds or other assets using funds for something other than corporate uses failure to main adequate corporate records like that one. Probably everybody checks off um confusion of the record probably check that one off the use of corporate Corporation as a mere shell wonder what a holding company is and the most vague term in the world under capitalization that's just five of them. I'm pretty we checked off three of those five right there right um so remember piercing. Avail is really simple hence the importance for adding the layers as we go along and and that's awesome by the way because I I like anyone who's listening right. Now. It's like all right llc's provide limited protection right and so you have to implement these other strategies if you want to protect yourself uh to the degree but to the degree that that you feel like is worth it for you and and I think you just kind of laid out some pretty. Some some pretty awesome like um you know hurdles to kind of aim for right. So it's like hey if you're worth over you know a million bucks like you should you should be like exploring the trust option and whatnot. So. I think that's super helpful my question now kind of switching over to the to corporate veil and like piercing the corporate veil. What I'm hearing is that corporations are a lot like llc's in the sense that like they don't really offer as much protection as people might think they do no. They really don't again like corporations are generally set up to split up ownership and provide tax as bages. That's it right. They offer some limited every every corporation or LLC. They offer some limited bail of protection yeah but it one's not stronger than the other. The the same arguments are going to be made of how do I pierce. An LLC is going to be the same way that I'm going to pierce a corporation or escorp or or whatever then. It's a matter of like okay where am I putting these shares. These assets into the next l up from there. So when we're when we're looking at creating entities right. We're on this fence and we got to pick which side. We're going to fall on are we going to fall on I care more about tax mitigation or do I care more about asset protection. Most wise investors are going to fall on the side of I want to protect myself so people can't take it from me yeah so. Let's create the strongest system that I can afford at the time and then I'm going to have my CPA and wealth. Manager then perform their miracle from within the system from there yeah but if you think that you're just going to be able to create these structures and say hey I'm going to create you know we can just say let's create the Taj Mahal system like we got the hybrid trust with a limited partnership and an LLC and then all of a sudden you think like I'm going to be able to hide assets from you to not pay taxes on like no. That's that's not going to happen right. But what you're see. We can do is create the system put that in place and then have your um CPA work within the frames of the system and then their job is to then say hey I would recommend go buying this. Or I would do this for tax mitigation strategies um. Maybe we set up a side SE Corp. You know to push money and profits into so. It's tax at a different rate. So there's more tricks that we can do once the system's in place. But the system itself is not going to help I could keep you on here for like another three hours. Brian we are we are coming up. We can sit up another time yeah. No this this is already a lot right. This is a ton of information and by the way uh you had mentioned it a couple of times you have a book. Overexposed correct is is the title of the book and that link to that bookt. Yeah title of the book is what over exposed and you know you can find it on Amazon. It's the number one bestseller um and I break down the whole world of asset protection from like we just talked about the layers we're just starting out LC's and insurance um scaling up to limited Partnerships the world of trust uh and then like how we got here like we didn't even talk about the messed up world and how we got to this situation so understand what we're doing which we can do in another episode um. But I I realized there was not a overall you know reaching horn book on the world of AET protection. People had to rely on just saying there's a book on llc's. There's a book on this there is a book on that or someone wrote an article on this but there was never a One-Stop resource to say I just need to learn the umbrella of it and then I can figure out from there where I can go and then you have more questions that you can ask the attorney you know from there in case laww because I love talking through case law because then um I've had this happen a lot people will call in like here's some cases whoever you're talking to go ask them these questions and present these cases to them and then the attorney will say like oh let me get back to you and they never hear from the attorney. Again. I love that like little Jedi Mind Tricks there um yeah. Uh you also mentioned a uh if people want to get a hold of you you do offer uh consultations uh. They can find that online I'm assuming at your your website yeah. Just jump on my website www . Btbl. Legal.com and there's also a link to get to access to the book there as well um and I do a free hourong consultation. I'd rather have you have some sort of opinion that's worth something than um. You know a shitty one yep and then you know whether we're the right fit or not uh. You know we'll go from there. But at least I'd rather have you have something you know worth your time for taking you know listening to this that's awesome man and I will be putting that link in the description box down below Brian not going to let you go uh in in typical Gold Mine fashion until you give the audience one final gold nugget yeah. One final gold nugget it is an investment right show um don't get too deep in the weeds just just jump man. Like there's a million books you can get caught in analysis paralysis. Eventually they all say the same thing you know so I I I fight professionally on the side like Inu Jitsu and I I just like to jump into stuff. In the deep end. Um read a couple books figure out what you want to do and then School of Hard. Kns start investing you're going to screw up right like hopefully. You don't lose you know your deal um and then learn from. It don't make the same mistake twice and grow you know but don't get stuck in analysis. Paralysis just eventually pull the trigger and start going.
•  That's up is that what those medals are by the way in the background yeah yeah. I have them around my office and they're like pictures of like different like match yeah. Like I ranked I won like I won pans which is really big twice in like a couple World Championships and so I have different you know pictures and stuff holy. Not not only are you like a monster. A tur you also people up. You can them up with your mind and your body baby. That's where you just draw the ears like I can't hear you oh yeah cauliflower. The cauliflower ear is for the people that that aren't watching the video yeah yeah that's awesome man Brian. This has been awesome and uh and I hope that you'll come back on for a second uh for a second show. Here this has been uh. This has been great. This has been great awesome. I appreciate it thanks for having me on of course.