Episode Transcript
[00:00:00] If you are interacting with other people and other objects on this planet, there is a chance that you will be sued at some point.
[00:00:15] This may surprise you.
[00:00:18] Asset protection is not 100% foolproof. When it comes to asset protection in a legal sense of the word, I often have clients who come in and they go, I want you to protect me against lawsuits.
[00:00:33] And one of the things I always have to explain to them is there is no protection against lawsuits other than close your door, stay in your paid off home, pay your taxes, and don't ever go outside.
[00:00:47] Because if you are interacting with other people and other objects on this planet, there is a chance that you will be sued at some point in your life. So there is no protection against being sued at all that I can think of.
[00:01:06] So what we do is we fall back to, okay, well, let's talk about asset protection. What do we do when we get sued? It's not an if, it's a when. If you are a business, per founder or an entrepreneur, if you are in business for yourself, there's a very good chance you are going to get sued. If you are a real estate investor, if you own a, a rental property, period, one or more, you run a very good chance of being sued. If you are a professional, of course there is a great chance you're going to be sued.
[00:01:45] If you drive a car, there is a very good chance you could probably have a wreck that is absolutely your fault, no matter how careful you are and how wonderful of a driver you are and how experienced you are, and you will be sued.
[00:02:02] So with that said, everybody goes, okay, well then I want you to protect all my assets we can protect. There is no 100% protection of your assets. So let me lay that out there to you as well. There, there is Nothing that can 100% guarantee that a creditor cannot take your assets to satisfy their claims against you.
[00:02:32] But you can sour the milk, you can muddy the waters.
[00:02:38] So let's assume that someone does sue you and they get that judgment and it exceeds your insurance coverage. Maybe it was a child was on a trampoline at one of your rental homes. And of course your liability insurance does not cover trampolines.
[00:02:58] A person was bitten by a dog at one of your rental properties.
[00:03:04] And of course your liability insurance does not cover dog bites.
[00:03:10] Some other things that we've seen.
[00:03:13] People have been hit by weapons at rental properties. And when that happens, the insurance may not cover that because they don't cover intentional acts, crimes.
[00:03:28] So these are things that you have to think about. Everybody goes well, I've got insurance, I'm fine. Properties in solely in my name. I'm fine. I don't have to worry about it.
[00:03:36] So those would come, those lawsuits would come from what we call inside creditors. They are literally inside the asset itself, their guests, their tenants. Maybe it's a tenant who is coming after you based on discrimination or it's not even a tenant. It's a, it's another person, an outside person who was just a prospective tenant and they are coming after you saying that you discriminate against them in renting the property or refusing to rent the property to them on for a. And you discriminated based on a protected class.
[00:04:10] You probably don't have insurance that covers that.
[00:04:13] So all of those are what we call inside creditors. They're inside the house, they're going to come after you. Now, another thing may be that, well, they're not inside creditor, they're an outside creditor. It is that car wreck that you had. Maybe you own an office building or a store, a workshop, and someone came to visit your business, your place of business, and they slipped and fell at that business and now they go, okay, well, I'm going to, I'm going to sue you and it's going to exceed any liability insurance you have. It's not covered whatever may have happened.
[00:04:51] So now I'm going to go and try to take your other assets. So if that office building is solely in your name, that business is solely in your name, rental property is solely in your name, all of that is the same. And this outside creditor, now because they have nothing to do with the rental property, this outside creditor to the rental property can say, hey, I got a judgment, I'm gonna come take that property away from you.
[00:05:14] So what we try to do is let's sour the milk on that.
[00:05:18] Let's start putting some things in place.
[00:05:21] So whenever we're talking about these outside and inside creditors, we're also talk thinking about horizontal and vertical liability protection.
[00:05:33] So the horizontal protection is sort of this wall, this firewall, this floor. Firewall floor that we put between you up above and everything else, all your assets below you, all your active businesses, all your real estate, everything else that you have below you, we try to insulate you from them and them from you. So if someone does sue you, that outside creditor comes in after you individually, then that firewall should stop them from coming after that rental property if it's been done right? Not only that, but let's say you own two or three rental properties we're going to want to do vertical asset protection as well. That will shield that property against something that happens over at the other properties you have.
[00:06:24] So now you've got a wall between them and, and a floor, a ceiling between yourself and your potential liability assets. So does that make sense? Okay, so I like to get that out there, that we do that. So when we say muddy the waters, sour the milk, what we're really talking about there is we're going to layer protections, layer entities, layer trusts on top of each other and within each other, and nest them within each other. So let's take that example where there's a trampoline at the rental property that you own and of course it's not covered by insurance and there's a child who is on the trampoline and they break their neck and now they are a, they're paralyzed for the rest of their life. They're 10 years old. They prospect to live to 75, 78 years old. So you got 68 years of caring for a, a person, a paralyzed person, which is very expensive.
[00:07:30] So of course that's going to exceed the value of that property that's there. But what we would have done to protect that. So, so if it's solely, if that house, that, that rental property was solely in your name, then this creditor, who is an inside creditor to the house, but an outside creditor to you individually, they now can go, oh, well, I can take the house, but it was in your name as the owner. So now I'm going to also go after everything else that you have that is solely in your name. The names all match.
[00:08:02] And look, you own this property over here, you own this business, you have this bank account, you have all this stuff. I'm going to take every bit of it to try to get enough money to help pay for my care for the rest of my life.
[00:08:17] And even then it may not be enough. So I'm going to be out here and you're going to have to declare bankruptcy to get rid of me. And when you declare bankruptcy, you're going to have to sell all of this stuff or the trustee is going to sell it for you, take it all to satisfy me as your creditor, now as your outside creditor.
[00:08:37] So to avoid that, instead what we would do is that property, the landlord, the owner of that property would be a land trust with a third party trustee.
[00:08:48] So yeah, they're going to sue the trustee as trustee of the trust of that property and that property is probably going to be lost. It's probably gone.
[00:08:57] But your other property over here is owned in a different land trust.
[00:09:02] Your company is owned in an LLC that is a multi member llc.
[00:09:10] We're going to have things put in other places. Now you, a lot of people, they always go, oh, but what if they come through the trust and they come after me individually?
[00:09:20] Well, number one, there's nothing in the law that would allow them to do that. Unless you are the one who set up and bought the trampoline and set it up at the property and said, oh yeah, there's trampoline there, it's perfectly fine here. Kids, get on the trampoline and play. Of course they're going to sue you because you're the one who created the hazardous condition. But if it's your tenant who did it and it just happens to be on your property, you're not the one who personally, as a human being went and set this trampoline up and created this hazardous condition for this child.
[00:09:49] You should not be at risk in that. So this is another reason we tell people, if your properties are held in land trusts and away from you and away from each other, don't go in swinging hammers, don't go in swinging paintbrushes, don't do work on the property yourself because you are just setting yourself up to be named in a lawsuit like that should it happen. So don't do that.
[00:10:16] So it's going to protect it now. But, but, but assume that, okay, in the off chance that they are going to say, well, we're going to go through the trust and we're going to come after you individually as the beneficiary. Somehow, some way, we've, we've never had it happen, knock on wood. But if they ever did, what they would find there is an LLC and that LLC does nothing except hold that beneficial interest in that trust. And it's a multi member llc.
[00:10:43] And that LLC has done nothing to those people. So okay, fine, so they get a judgment against that llc. That LLC again owns nothing other than the beneficial interest in that trust that owns that real estate. So now they've gone through all this. So they've gone, they have dived in and they've, they're swimming through this muddy water of the land trust. And now they're gonna, they're gonna go, okay, we're, we're coming through, we're coming through. We're gonna find out who the beneficiary of the land trust is. And great. It's an LLC that is a multi member LLC from another State, it's not even in Florida. So now we're gonna have to try to poke through that. How are we gonna poke through that? Because we know, we know that LLC didn't do anything to us.
[00:11:25] And even if it was you who set up the trampoline, and they go, well, we've named him too. We think he owns this llc. Well, yeah, you may own that llc, but you can own it with other people that we help you put together. You're going to have multiple members, so the only thing they're going to get against you is a charging order. They're not going to actually take your ownership of the llc.
[00:11:49] And even if they did, who cares? Because that's all that LLC owns, is that beneficial interest in that land trust. It may own some other beneficial interest in other land trusts.
[00:12:00] But if there's a high risk of this ever happening, we usually recommend that you have multiple LLCs.
[00:12:06] Start in July 2026, we will be able to have multiple protected series LLCs under one LLC.
[00:12:15] One series LLC will have separate protected series in each land trust to separate them that way. Fortunately, it's not available right now at the time I'm recording this video, but starting July 1, 2026, it will be. And I'll be talking about that in other videos to come.
[00:12:31] So that's just the way that we muddy the waters.
[00:12:35] And a lot of people go, well, what about my car?
[00:12:38] You know, I can't. My car's got my name on it. I'm the driver of it. I'm the insured.
[00:12:43] So what happens when I'm in a wreck? Well, for that, we always recommend each spouse have their own car with their own separate insurance, have an umbrella policy and only drive your car if at all possible. Try not to ever drive your spouse's car, because Florida has this great thing called tenancy by the entirety. So anything that you own as a married couple is not at stake of being taken if a judgment is entered against just one of the spouses.
[00:13:16] Now let me clarify that. That's any creditor except the United States. The United States government does not recognize tenancy by the entirety. So they're going to take at least a half interest from the offending debtor spouse.
[00:13:30] But for everyone else, again, it's more souring of the milk. It's more muddy waters out there. So they go, okay, great, we've got this judgment against the one spouse.
[00:13:46] Let's go. And it's exceeded somehow some way, it exceeded both the maximum limits of their own insurance, their liability insurance Then it exceeded the umbrella policy, which should be at least 2 million.
[00:14:03] Now we're going to go see what else they have because we think they have a lot of money.
[00:14:07] And then they find everything that you own is in multi member LLCs, it's in land trusts held with your spouse so they can't touch it easily and quickly. So while they may have this massive judgment against you, it gives you leverage to settle that judgment for less. So it may be a $2 million judgment and you go, okay, fine, we'll settle for $200,000. $200,000 sounds like a lot of money, but if you have that kind of those kinds of assets that they're in danger and you've put them in the muddy waters with the sour milk.
[00:14:40] It is writing the check for 200 or 250,000 is a drop in the bucket compared to facing losing $2 million to a judgment and a deficiency judgment that exceeds your insurance limits on anything. Or maybe it's a contractual case, maybe you got sued on a lawsuit on a personal guarantee of some giant commercial loan you had, or maybe it was a business dispute with business partners and it's multi millions of dollars that they're coming after.
[00:15:14] But you have, we've muddied the waters. We've, we've set up structures in a way that at most they're going to get charging orders and, and other things that they just can't, they just don't want to mess with it because they're going to have to file a lawsuit to go after every one of these things that you have moved around.
[00:15:34] So I've done another video, we'll put a link to it here. About the green light, yellow light, red light, timing of when you do your asset protection.
[00:15:42] But if you're doing it in the green light, or at least the yellow light of that time of your life, if you're doing your asset protection strategies at that point, you should be okay that these muddy waters, the sour milk is while again, it will not protect you from being sued, it will make it very difficult for a judgment creditor to try to come after those assets and just take them from you to make it very easy. So because it's so difficult, they will usually settle for less money because they just don't want to go through the added time, expense and energy to try to collect the money. Also another thing, great thing about the land trust is your name. If you're using a third party trustee like our company, your name's not appearing on anything. So one of the Things that they're going to do. If they're using a good attorney, that attorney is going to check them out, check you out before they sue you. And they're going to determine whether you are judgment proof is what we call it, or if you're uncollectible.
[00:16:47] And one of the things they're going to tell their client is they're going to say, hey, we looked them up.
[00:16:51] All we see is maybe that they're a manager on a company or two. But we don't see anything that that company owns.
[00:16:58] We don't see any real estate that they own because you own everything in land trust. They don't know that.
[00:17:03] So your name's not appearing on any of that.
[00:17:06] And they're going to tell their client that, okay, you're getting ready to spend a pretty significant amount of money to sue them under this contract to try to get your get paid what you feel you are owed. But I'll tell you right now, you're going to spend all this money and there's a very good chance you will never see another dime of it. So you're what we call throwing good money after bad. I know everybody's heard that saying before and it may deter them from ever bringing the suit in the first place because it's just. Why are they going to just go down that road? I've had chances where I've had a chance to sue people over bad business deals for myself.
[00:17:43] And I look at it and I go, they don't have any money, so.
[00:17:48] And they don't have any assets because I know who they are. I really know they don't have anything, so why would I bother? Instead, I'm going to take that money that I would have spent on lawsuit and I'm going to put it in back into my business to improve my business, my marketing, my sales. I'm going to make it better so that I don't have to.
[00:18:06] I will just run them out of business the legitimate capitalistic way. I'm not going to. I'm not going to sue them in a lawsuit and go the slow route, slogging route. That's going to cost me a lot of money, time and energy. Instead, I'm going to put my energy and my money and time back into my own business. And I will thrive without that business partner.
[00:18:26] And I don't have to sue them. I'm not going to sue them even though I have every legal right to sue them. I'm not going to waste my time, energy or money. But anyway, I'M going to put a link right up here to the video about the red light, green light, yellow light of asset protection planning. Understand again, there is no guarantee that any asset protection strategy is 100%. But it sours the milk, it muddies the waters, and it makes it a lot harder for for your judgment creditors to get to your stuff to satisfy their judgment, to satisfy to get their money. And whenever you do that, it makes it a little bit easier for you to settle that case sooner if you didn't avoid it completely in the first place.
[00:19:11] Thanks for listening to this edition of Trust this. If you got something out of it, please press like and subscribe and give us a five star review to help us reach others who can benefit from this series. Until next time, keep aspiring to a better life.
