What You Don’t Know About Asset Protection Can Hurt You | 427

What You Don’t Know About Asset Protection Can Hurt You | 427

Asset Protection

Educate yourself about asset protection before it’s too late! Today on Tax Hacker Tuesday, Tim Berry shares some of his best asset protection tricks including new beginning trusts, spin theft protection, and much more.

Asset Protection

What You Will Learn About What You Don’t Know About Asset Protection Can Hurt You:

  • What a “new beginning” trust is (and how it can protect your assets)
  • The basic concepts of asset protection
  • How to protect your assets in the best way possible
  • The basics concepts of trusts and how to use them to your advantage
  • What spin theft protection is and why you should use it

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Matt Theriault: Hey rockstars, Matt here. Real quick, I just wanted to pass on a quick message, Tim’s on vacation and I wanted to pass on a message from him. He says it’s been a pleasure working with you, those of you that have decided to take him up on his offer to have your Tax Hacker Blueprint created and those of you that haven’t the offer still is open. Here’s what you get, you get a one-on-one consultation to establish where you are and where you wanna go, you get a custom tax action plan organized into easy to follow steps so you can keep all the money that’s rightfully yours, you get an asset protection plan organized into easy to follow steps, so you know how to protect everything that you want protected, and you get an accelerated retirement strategy so you can enjoy life while you’re still young enough to do so, and you get quarterly check-ins all year long to keep you on track towards your goals.

Normally this is $3,000 a year for this level of planning and consulting with Tim. The introductory offer just for you as an epic listener is half off of that. So just $1,500, and if Tim and his team can’t save you at least double that, then it’s free, you pay nothing. So go to taxhacker.com, grab Tim’s free book on how to navigate the loopholes in Trump’s new tax plan and then after you’ll have an opportunity to schedule some time with Tim and his team and just let them know that you heard this offer here on the Epic Real Estate Investing podcast, tell him you want your Tax Hacker Blueprint and they’ll take it from there. So go to taxhacker.com and everything you need, it’ll be right there, and someone asked the other day, why would Tim do this, why is he offering to give money back and essentially provide free service? Well, this is how Tim finds new clients, by offering a ton of value upfront to demonstrate how he can help. He offers it here each and every week asking nothing in return, and if you wanna take the next step and create a direct professional relationship with Tim, he’ll extend you that type of service even at that level as well.

And so he just wanted to demonstrate how he can help, and then he just puts the ball in your court to where you get to decide which direction you want to take. Sometimes it’s a good fit, sometimes it’s a great fit, sometimes it’s not, but either way, Tim will see to it that you are better off after that call then you were before.

All righty, now, on with the show.

Speaker 1: This is Theriault Media.

Did you know that up to 50% of your lifetime income will be wiped out by taxes? What if you could stop this madness? Isn’t it about time you play on a level playing field with the wealthiest 1%? Now you can. Tim Barry, attorney at law, shares here, each and every week, current tactics and strategies that anyone can implement to hack the tax code, protect your assets, and keep what’s rightfully yours. It’s time for Tax Hacker Tuesday.

Tim Barry: A new beginning trust, well what exactly is a new beginning trust? Well, a new beginning trust is a way to hold your assets so it makes it very difficult for judgment creditors, those people who win a lawsuit to take your assets away from you. And let’s go into a basic concept of asset protection, and the basic concept is this, whatever rights you have in property, your judgment creditor is gonna have the exact same rights. To put it a different way, they step into your shoes. Whatever rights you have, they have the exact same rights. If you have $100 in your pocket, and you can take it out and spend it anytime you want to, if you lose a lawsuit, the person who won that lawsuit is gonna have that right to grab that $100 out of your pocket and spend that money any way they want to.

So our goal is to make it so that your rights and your assets are somewhat limited. Now they’re not totally limited, you’re still gonna have control, but you just don’t have complete unfettered use of your assets. We wanna make it so if a creditor steps in your shoes, those shoes are just a little bit uncomfortable for them. Now how are we gonna do this? What we’re gonna do is we’re gonna utilize something called a trust, and a trust is basically a contractual agreement between three different parties. We have the first party is the grantor of the trust. They’re the ones who create the actual trust, they say what terms and conditions are gonna be in the actual trust agreement. Then they also name who is gonna be the trustee of the trust, and the trustee of the trust is the one how manages the assets of the trust. They’re the ones in complete control of the trust, and then finally we have my personal favorite role to be in, is the beneficiary of the trust, and the beneficiary is entitled to receive the benefit of the use of the trust assets.

So this is the basic concept of a trust, we have a grantor who creates the trust, we have the trustee, who manages the trust, and then we have the beneficiary of the trust. Now the thing is, once you decide to do a trust, that’s the starting point because not all trusts are created equal. Now at the very least, we wanna make sure that the trust has something called spin thrift protection, and what does spin thrift protection mean? Well, let’s go back to the early days of trusts. A lot of times trusts were created by mom and dad because they knew they had a kid, let’s just call him Junior, who went out and spent way too much money.

So they wanted to be able to protect Junior from themselves. So what they did is they created a trust and they said, Junior, we know you’re a spin theft, and so we’re gonna let you know right now that you only get whatever we want you to get from the trust, you don’t receive any more than that and not only that, but you can’t borrow money based upon the value of the trust, ’cause the trust document’s gonna say you can’t do that. So that’s something called spin theft protection and in modern days, spin theft protection is just some language inside a trust document that says nobody can take away the beneficiaries right to the trust assets and nobody can place a lien on the trust assets, and key point here, in order to have a valid spin theft trust in most states, the grantor, the one who creates the trust, cannot be the same person as the beneficiary, and this is very important. So once again, in order to get the baseline level of asset protection, the spin theft protection, the grantor, the creator of the trust, cannot be one of the beneficiaries of the trust. And let me give you an example of this.

A lot of people, their knowledge of dealing with a trust is based upon a living trust. And in a living trust, the grantor is the individual who sets it up, then they are also the trustee, and then they are also the beneficiary. Now, knowing what you know now about trusts and spin theft trusts in particular, does a living trust give anyone any asset protection? The answer is no. If you establish a living trust, you are not gonna have any asset protection. Once again, if you establish a living trust, a living trust does not give you asset protection. So what do you think you need to do in order to have the trust give you asset protection? Well we’re gonna do a slight twist, what we’re gonna do is we’re gonna go to your parents, mom and dad, and it doesn’t have to be your parents, it just has to be someone who genuinely cares about you. Someone who truly would set up a trust and put assets into it for your benefit. It can’t be Joe the taxicab driver down the street. That’s gonna be a sham, so what you do is you go to somebody who genuinely cares about you. You say mom, dad, what I would like for you to do, is I’d like for you to create a trust for my benefit.

So mom and dad are gonna be the grantors of the trust. They’re gonna create the trust, and they’re gonna put in the terms and the conditions of the trust. Then they’re probably gonna appoint you, and this is the key point here. This is kind of a mindblower for a lot of people, a lot of times what we can do is we can say that you are gonna be the trustee of the trust. So now whenever you go to make any decisions about how the assets are gonna be invested, who you gonna have to ask for advice on, yourself. You’re in control of the trust assets, whenever you wanna make an investment, you make the investment, you are the trustee, and the other cool thing, who’s gonna be the beneficiary? You! You and your family are gonna be the beneficiaries of this trust. So what we’re doing is we’re having mom and dad create a trust, they’re gonna sign a document, and by the way, a lot of people say, “How much liability do mom and dad have in this thing?” Well their liability is pretty much zero, they signed the document, and they walk away. Then they leave the trust, the administration and the management of the trust to you, so now it’s up to you on how those assets are gonna be invested, how the trust is gonna be handled and ultimately you are the beneficiary.

So now here’s the cool thing. Now let’s say that something awful happens and you lose a lawsuit, and your judgment creditor comes after you, they can’t touch the assets. Your assets, these assets inside the trust, I said your, I was wrong there. The assets owned by the trust are not yours. You don’t have complete unfettered control over those assets, you have to abide by the trust document, and if the trust document says those assets can’t be assigned for the benefit of creditors, whola, they step into your shoes, your bound by certain terms and provisions of the trust, they’re now bound by certain terms and provisions of the trust.

Now, this sounds incredibly simple and it’s not as simple as it sounds, I’m oversimplifying quite a bit here actually, but let’s get down to the basics, has this been tested and has this ever worked before? The answer is yes. There’s been a number of cases in regards to these types of trusts, but let’s just go over one basic case that took place in bankruptcy, and in this case, what happened was this, mom and dad established a trust, and it was for the benefit of Junior, and Junior just so happened to be the trustee of the trust as well. So if Junior wanted to go out and buy a shiny red Ferrari, all he had to do is talk to himself and say hey, trustee, will you be so kind as to distribute money out of the trust for me to buy a Ferrari, and the trustee, who is Junior, would probably say yes.

So Junior had control over the trust assets and he was the beneficiary, Junior goes into bankruptcy. The trustees, the bankruptcy trustee, they get paid on commission, and they saw that Junior had about $120,000 inside this trust, so the trustee says, “Hey Junior, just hand over that $120,000, I’d like to take it over now.” And Junior says, “No, I’m not gonna do that because I have a spin theft trust. My trust is not subject to the claims of creditors and your bankruptcy trustee is a creditor.” Well, bankruptcy trustee didn’t like this one bit and so bankruptcy trustee says, “You know what? We’re going to court.” Well, the judge heard the case, she banged down the gavel and guess what? The bankruptcy judge said the bankruptcy trustee was not allowed to take away the assets. Now the bankruptcy trustee didn’t like this, so he appealed the decision, and whenever it went to the appellate court, the appellate court looked everything over and said, “You know what? Junior’s parents created a valid spin theft trust. Junior has limitations on what he can do with those assets. Bankruptcy trustee, you step into his shoes, you’re gonna have those same limitations, one of those limitations is he cannot use the assets in the trust for the benefit of his creditors, so bankruptcy trustee, fly away.”

Speaker 1: That’s it for today as we dream of a tax system that works just for you, but until then, you have Tim Barry. See you next Tuesday for another episode of Tax Hacker Tuesday.

Matt Theriault

Real estate investor and educator.