557: The Legal Structure That Can Make—or Quietly Destroy—Your Wealth

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There’s a strange paradox when it comes to wealth. The more you have, the more invisible risk you carry.

And most people don’t see it until it’s too late. I’ve seen this play out in a lot of different ways.

A physician builds a multi-million dollar net worth over decades—real estate, brokerage accounts, maybe a business or two.

Everything looks solid. Then one lawsuit hits. Or a divorce. Or even just a poorly structured partnership dispute.

Suddenly, assets that felt “owned” aren’t really protected at all.

On the flip side, I’ve also seen people with less wealth sleep better at night because their structure is airtight. Everything is compartmentalized. Risks are isolated. There’s a system.

The difference isn’t intelligence. It isn’t even an investment skill.

It’s structure.

Most people think trusts are something you set up when you are ultra-wealthy or you’re older… maybe as part of an estate plan. But that’s barely scratching the surface.

A well-designed trust isn’t just about passing assets when you die.

It’s about:
– Who actually controls your assets while you’re alive
– What a creditor can (and can’t) touch
– And how much of your financial life is exposed vs. insulated

In other words, it’s about whether your wealth is fragile… or antifragile.

And yet, this is where a lot of people get it wrong. They set up a trust… and then completely ignore the rules that make it work.

They treat it like their personal checking account.
They mix funds.
They sign things incorrectly.

And without realizing it, they’ve essentially built a paper shield that disappears the moment it’s tested. So this week, I wanted to dig into this topic with someone who has spent decades designing these structures for high-net-worth individuals.

On this week’s episode of Wealth Formula Podcast, I sit down with Mark Pierce, an attorney who specializes in asset protection, trusts, and advanced legal structures.

We talk about:
– What a trust actually is (and what it isn’t)
– The real difference between revocable and irrevocable structures
– Why timing matters more than most people realize
– How asset protection trusts actually hold up in the real world
– And the biggest mistakes people make that completely undermine their own planning

If you’ve ever wondered whether your current structure actually protects you… or if it just makes you feel better on paper… this is a conversation worth paying attention to.

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Transcript

Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at [email protected].

There’s a very fa- famous case out of South Dakota where an individual has had a, in California, had a spendthrift trust. She had, the money was funded by her f- her father, a fairly wealthy oil and gas guy. She got married, she had two kids. Her husband divorced her. Husband got a child support order. She took the trust to South Dakota.

He went after her in South Dakota to enforcement of that child support order, and South Dakota said, “Yes, we have full faith and credit of, uh, foreign state judgments in South Dakota, but the enforcement mechanism, the right to enforce that judgment in South Dakota, is subject to South Dakota law, and we don’t recognize the child support exemption, so we’re not going to pay it.”

Welcome, everybody. This is Buck Joffrey with The Wealth Formula podcast coming to you from Montecito, California. Today, uh, we are going to talk about something that we talk about, um, not infrequently because I think it’s very important, which is, uh, related to trusts. And, um, you know, there’s a strange paradox when it comes to wealth.

Uh, the more you have, the more invisible risk you carry, and, and people in, uh, often, uh, unfortunately don’t see it until it’s too late. I’ve seen it play out in lots of different ways. You’ve got a physician working for years, building multimillion dollar net worth over decades, real estate brokerage accounts, business.

Everything looks solid, then one lawsuit hits, or a divorce, or even just a poorly structured partner dispute, and suddenly all those assets that were owned, that created all that security, they’re all exposed. On the flip side, you see people with maybe a little bit less wealth even get themselves in some kind of trouble or whatever, lawsuits, et cetera, but they’re airtight and they sleep well at night knowing that whatever the case may be, what they’ve built is protected.

And that difference isn’t really about being smart or not. It isn’t even about skill. It’s about structure. Most people think trusts are something you just set up when you’re ultra wealthy or maybe you’re older, maybe it’s part of an estate plan, but it’s really just scratching the surface. A well-designed trust isn’t just about passing assets when you die.

It’s about who controls your assets while you, while you’re alive, what a, what a creditor can and can’t touch, and how much of your financial life is exposed versus insulated. In other words, it’s about whether your wealth is fragile or anti-fragile, as they say. And yet, this is where a lot of people get it wrong.

They set up a trust. They don’t follow the rules, you know? They treat it like their personal checking account, mix funds, sign things incorrectly. And without realizing it, you’ve got a paper shield that disappears the moment it’s tested. So, what we’re gonna do this week is dig into this topic some more- With another expert.

We’ve had Doug Lodmell on there, on here, uh, several times in the past. He, and, uh, and Doug has given us some great insight. He’s my, uh, asset protection attorney, but I wanted to get another perspective as well. So on this week’s, uh, episode of Wealth Formula Podcast, I sit down with a guy by the name of Mark Pierce.

He’s an attorney who specializes in asset protection trusts and advanced legal structures. He, he’s worked on the other side, uh, for the other team as well. He used to, uh, enforce bankruptcies, so he can tell you, he can tell when structures are problematic or not. And we, uh, talk a lot about what things are.

Like, for example, what exactly is a trust? I mean, there are so many things, uh, so many trusts, right? I mean, uh, if you don’t know now, you should have a living trust and a will. That’s– I don’t care how wealthy or not wealthy you are, it just avoids probate, right? You’re gonna learn about, you know, those differences between revocable and irrevocable structures, why timing matters, uh, like more than people realize, how asset protection trusts actually hold up in the real world, and, and ultimately, the biggest mistakes people make that completely undermine their own planning.

So if you’ve ever wondered whether your current structure actually protects you or not, or maybe you don’t even have a structure yet and you need one, uh, this is a conversation worth paying attention to, and we’re gonna have that conversation right after these messages. Hey, everyone. If you haven’t done so, make sure you sign up for Investor Club.

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Welcome back to the show, everyone. Today, my guest on Wealth Formula podcast is Mark Pierce. He is a, uh, trust and LLC attorney. Over 40 years of experience in asset protection, tax strategy, and estate planning. Uh, he’s seen it from both sides. He’s also been a former, uh, bankruptcy trustee, spending, uh, years unwinding asset protection structures for, um, uh, for creditors.

So, uh, he, he– now he designs plans meant to actually hold up under real legal pressure, uh, often using jurisdictions like Wyoming and Nevada. Mark, welcome to the show.

Hey, thank you very much for having me, Buck.

Let’s start with this. I mean, people have heard of trusts, and in our group, a lot of people use trusts, but let’s try to create sort of a structure.

How should we look at it? Let– Break it down for us.

It’s a pretty simple structure, really. It’s, um, it’s a contract. Essentially, you have to have a trustee, you have to have a individual who establishes a trust for the benefit of someone called the beneficiaries, and then you have to set something in the trust that the trustee manages.

That’s what a trust is.

Let’s dive into that a little bit deeper because we know that there are different kinds of trusts. People have living trusts. Uh, they have revocable and irrevocable trusts. What’s the difference between that?

Well, a revocable trust means that the person establishing trust or somebody the person establishing the trust designates can, uh, get rid of the trust.

They can revoke it at any point in time. If it’s irrevocable, then there are only certain instances in which the trust can be revoked.

And what would you use each one of those for at a high level?

Well, essentially the difference is if you have an irrevocable trust, then at the end of the day, the beneficiaries cannot revoke the trust, and they have to live up to the terms and conditions of the trust, and they have to take care of the assets within the trust the way that the person establishing the trust sets.

If it’s a revocable trust, you put it in there for some particular purpose, say like a revocable living trust, which is used a lot for estate planning these days. If a revocable living trust, you put your assets into it when you pass away, it goes down to your kids or whomever you designate, but you can revoke it at any time.

You can put things in, you can take things out, you can do whatever you want. Typically, in a revocable trust, you put things in, you can’t take them back out.

Correct me if I’m wrong, but a revocable trust, things remain in your estate, and so, you know, the issue there is if you’re, you’re trying to do this for some sort of estate planning or, well, I don’t know, even potentially asset protection, it may not be particularly useful.

Well, that’s right. A revocable trust has no efficacy in terms of asset protection- Got it … an irrevocable trust does. And they’ve had irrevocable trusts for years. You know, you have what they call a spendthrift trust because your kids just go through money like, uh, it’s not their money and they could care less.

So you put a spendthrift trust together so that, uh, your kids have something to provide for them throughout the remainder of their life without spending it all in one or two years.

So revocable trust, I think, like, the best example is a living trust where essentially what you’re doing is you’re not getting any asset protection out of there, but you are, you are essentially creating, uh, a situation where you can avoid probate, uh, once you die.

And so that’s, you know, just giving you a little bit of a, uh, you know, a way to sort of circumvent some of those issues. Um, is that right?

Yeah. A revocable trust, you know, is a recognition by the state legislature that most people can read, write, and take care of themselves, so what do you need a probate court for?

Right. You know, maybe 100 years ago, a lot of people couldn’t read or write, so you had to have a mechanism to transfer assets from somebody who was dead over to somebody who’s alive, and that was the will and the last will and testament and all that.

Right.

But a revocable trust just avoids the probate.

So why would you pay 5% to 10% of the gross value of the estate just for, to pay somebody to come and read, write, and distribute assets? People can do that largely for themselves these days.

So now we go to irrevocable trusts, and this is where you get potentially a real, uh, opportunity for, uh, asset protection.

Is that right?

Yes, that’s right. Wyoming and, uh, a number of other states these days, I think there’s 17 states in the United States that recognize within their own uniform trust codes, recognize the ability to establish a trust for their own benefits, called a self-settled trust. Unless you have a statute that specifically allows that, the common law for revocable or, or other trusts does not allow that.

So in that situation, you’re creating a trust for which you yourself are the beneficiary, an irrevocable trust?

That’s either you- Got it … or you and some other people in your family.

These domestic trusts are true asset protections. They’re actually effective. Is that right?

Yes. They’re called qualified spendthrift trusts- Mm-hmm

because you establish the trust for the benefit of yourself and your family, and you take it out of the hands of your creditors’ estate as a result of doing that.

Got it. How strong are these things? Uh, you know, I, I’m, I’m curious about that because I know, I remember, uh, during my own process of setting up trusts, uh, there was some real concern about, you know, d- domestic, uh, asset protection trusts and challenges.

Like, for example, you know, I think back then I, I remember hearing about Alaska and, you know, some challenges with regard to, uh, those actually having significant strength in the United States.

You know, one of the difficulties you have, difficulties you have with a qualified spendthrift trust, and there are a couple cases out of Alaska.

One I thought was very interesting involved two Montana residents taking a piece of Montana real estate, putting it into an Alaska trust when they had an outstanding creditor who was after them for foreclosure, and then saying, “No, no, no. You know, Alaska’s laws doesn’t allow you to come after this piece of real estate in Montana that you have a judgment on because of Alaska trust laws.”

And so that wasn’t a very good case. That’s a pretty poor case. So you have what they call the difference between movable assets and those that aren’t movable, so like a bank account, stock account, cash, liquidity. Those sorts of things are movable. You can put them into an LLC, you can domicile the LLC in Wyoming, and you have the address of the stock accounts or the cash accounts in Wyoming.

Wyoming’s law is gonna control the jurisdiction as to how judgments are enforced against those assets. But if you have a piece of property in Montana, Wyoming law is not gonna control what happens on a foreclosure process with property in Montana.

Yeah, so there just generally tends to be, I think, less protection for non-liquid assets.

Is that fair? I mean, I think it seems to me that, um, you know, the– when you get in these situations, unless you, you know, anticipated it, liquidated your property and, and, and, you know, put it into an account, you don’t have that much protection.

Well, you know, you’ve got a court at some place in, say, like Missouri, that has a piece of property in Missouri with a Missouri creditor and a, and a person from Missouri on it.

Why would Missouri law not apply? And that’s what you generally run into. So what you run into with real estate, Benhamaf, is that you form an LLC, you put the real estate into the LLC, it leases out the real estate, you make money on it. You transfer the excess working capital within that LLC out to, to an LLC in Wyoming, and you domicile the cash in Wyoming.

Yeah. So it isn’t as though Wyoming law would control the real estate, but r- Wyoming law would control the cash that was generated by that real estate.

Yeah. Uh, one more nuance you often hear about, um, just, you know, just for educational purposes, the difference between a grantor and non-grantor trust.

Right. Well, a grantor trust is the grantor maintains liability for the income taxes that come off the trust. Non-grantor trust, the trust maintains the liability for the taxes that come off the trust. That’s a little bit of a misnomer, because in a non-grantor trust, within 60 days after the end of every year, the trust can distribute the income out to the, to the grantor of the trust, and then the grantor would be liable for that income, the tax on that income.

But there’s not double taxation, so if the trust pays the tax, the grantor’s not liable for the tax. So let’s say the trust made a million dollars, paid the tax on that, and then distributed it out to the grantor. The grantor wouldn’t have to have a second round of taxation like you do with a corporation.

What, what is your, uh, general take on, on these things when you set these up? When would you do, when would you do each one of those?

Uh, for, well, for, for a grantor trust, I mean, that’s an ec- It depends on people’s net worth and what they have and what sort of liabilities they have within their estate.

When you have people that are part of a high liability profession, like surgeons, um- Mm-hmm … some attorneys, uh, a variety of tech people Um, then you would look at doing a non-grantor trust and establish an asset protection strategy so that if something were to happen to them, they have a way to settle those obligations out or get away from them.

For most people, most middle class Americans, a revocable living trust is absolutely fine, ’cause what do they have? They’ve got their house.

Yeah.

They’ve got their retirement fund, which is exempt from execution. Like in Florida, I, I tell people from Florida, you, you have an immovable asset called your, your, uh, your homestead, and you live there.

And, and what is the exemption of Florida on a homestead these days? It’s like $10 million. So why would you need to put that $10 million piece of property into a trust for asset protection purposes? Very few homes are worth more than the $10 million. So the difference is, you know, somebody who’s, someone who’s involved in litigation or potentially involved in a lot of litigation.

Yeah. How about just in terms of the grantor and non-grantor parts, though? Like, when, when, when would somebody do a grantor trust versus a non-grantor trust?

Yeah, there’s something very interesting. You know, if you’re, if you have an estate that’s worth $10 million or more, and you wanted to move those assets out of your estate and keep them away from you for estate tax planning purposes, you would do something that is, is, is excluded from the standpoint of estate taxation, but included from the standpoint of tax.

So let’s say that you’re making a million a year, and you’ve got $10 million worth of assets. You wanna put those exempt assets into a trust to keep them out of your estate. For estate tax purposes, you move them into a non-grantor trust, but you would make it intentionally defective so that you maintain the liability for the taxes on that.

That way, when you pay the taxes on the assets as they accrue in that trust, it’s taxed to you, and you continue to get the, uh, uh, you continue to get the dollars out of the tax structure because you’re paying taxes on it, and it depletes your wealth rather than the trust wealth. And it’s not a gift to the trust, so it’s an intentionally defective grantor trust.

And then you can also swap assets, low basis assets for high basis assets, to perpetuate the amount of the exempt that you, the exemption that you get within the trust. It’s not so much of an issue right now because a indi- individual has a $15 million estate tax exemption, so a couple would have a $30 million estate tax exemption.

So doing a, uh, a non-grantor trust, a defective non-grantor trust, effectively you, you’re doing the same thing as you are with a grantor trust in terms of taxation?

Yes, in terms of income tax section. Right. But estate temp- ’cause you’d be excluded it from your estate tax by using your exemption. So let’s say you have $30 million worth of real estate, and you’re in danger of that $30 million becoming worth 60 million.

You would put it into a non-grantor trust, use the, the estate and gift tax exemption for the 30 million. That way it’s out of your estate tax, uh, paradigm. And so if you passed away and it was worth $60 million- It’s got– It’s, it’s, it’s exempt. It’s not gonna be subject to estate tax ’cause it’s away from your estate tax.

In the meantime, though, you continue to pay taxes on that, so you con-continue to deplete your estate beyond the $30 million exemption, and you do it tax-free.

Yeah. So what– in what situation would you actually, you consider doing just a grantor trust? Because it– my understanding is irrevocable grantor trust, I mean, you’re still getting things out of your estate, aren’t you?

Well, well, that’s right. Irrevocable grantor trust, you can get them out of your estate. Yeah. Ab-absolutely- Yeah … right. But you’re going to maintain the tax liability because you’re making a significant amount of money- Right … and you would just as soon get rid of that money at your tax level instead of the trust tax level.

Because the maximum income tax on a gra- on a trust starts at $12,500, whereas on an individual, I think it’s like 180,000 now on a couple, 230, 240, I forget what it is. So that differential you try to take advantage of by paying the taxes at the grantor’s level rather than trust level.

Got it. Um, how useful are these irrevocable trusts in terms of not only, uh, asset protection, but, you know, I mean, for, uh, ultra-high net worth individuals, there’s a– the– a lot of the reason is really for estate taxes, isn’t it?

So, uh, is, is that sort of, um, the idea here is that you’re knocking out both asset protection and estate planning at the same time?

Yes, very definitely. Um, you know, estate taxation has been in and out of the trust code or the tax code now, what, five or six times in the last 100 years? And, uh, the last time that we had the exemption before it went up to 30 million, it was two and a half, $3 million.

So it was a very real issue for a lot of people. It’s not so much of an issue right now. So, you know, but when you look at the deficit in the United States, the borrowing capacity, and all these things, how much longer does it go before it starts being taxed again? I don’t know. So you put it in there to provide for estate tax planning, but you also put it in to provide for asset protection planning.

And, you know, not just your own asset protection planning, but for the benefit of your children. ‘Cause let’s say that you have a couple of kids, they get married. You have an asset protection trust, your kids become the beneficiaries. And the kids, kids are married, and then they’re divorced. You die, the kids inherit the money through the asset protection trust.

Their spouses are taken care of through the kids, but let, let’s say that the kids get divorced. Those divorced spouses who are outside your family cannot then come in and try to take a piece of your asset protection trust because they’re not beneficiaries of the trust. So it has sort of an inside/outside component to it.

What is your own feeling about various types of offshore trusts, bridge trusts, things like that?

You know, we, we sell- It depends. Y- y- we sell bridge trusts so that if something were to happen in the United States, it can go to an offshore trust jurisdiction like the Cook Islands or Nevis or whatever you want to pick.

Um, my feeling though is that if you pick the right trust, the right strategy, and work it the right way, why would you not want to stay in the United States? Because one of the comments that was made by a, uh, a court that considered one of these offshore trusts was, “Why would you transfer your money into the Cook Islands, which has 17,000 people on a sand spit in the middle of nowhere?

Why would you transfer your money to somebody on the Cook Islands who you don’t know, where you’ve never been, and trust them to take care of you?” Makes no sense to the court. The, the problem was resolved otherwise, but that was the, uh, the incredulous approach that the court took to these particular individuals.

If you come to Wyoming, Nevada, Alaska, wherever you do that, if you structure the trust and treat the trust as a trust, then the courts are going to have to recognize those trusts in dealing with the assets in them. Because there’s a very fa- famous case out of South Dakota where an individual has had a, in California, had a spendthrift trust.

She had, the money was funded by her f- her father, fairly wealthy oil and gas guy. She got married, she had two kids. Her husband divorced her. Husband got a child support order. She took the trust to South Dakota. He went after her in South Dakota to enforcement of that child support order, and South Dakota said, “Yes, we have full faith and credit of, uh, foreign state judgments in South Dakota, but the enforcement mechanism, the right to enforce that judgment in South Dakota is subject to South Dakota law, and we don’t recognize the child support exemption, so we’re not going to pay it.”

So you recognize it, but you don’t enforce it. It’s the same way, same way within the state of Wyoming with the Fraudulent Transfer Act. If you transfer assets into a trust, you’re subject usually to usufruct. You didn’t get corresponding value, so if you come to Wyoming, transfer the assets, four months after you do it, the statute of limitations lapse.

What you just said is kind of, uh, w- is interesting,

and I maybe, um, understand. So if you’re in South Dakota in particular, you, you mentioned fraudulent transfers. Can you tell people what you meant by that, and then I’ll follow up with my question?

Sure. And it’s kind of a misnomer, right? They call it a franch- fraudulent transfer, but it’s a voidable transfer.

What it’s saying is that you transferred your assets into the trust and you got a beneficial interest. That’s not a corresponding value. So as a result, it falls within our Uniform Voidable Preference or Uniform Fraudulent Transfer Act. We can pull that transfer back unless a certain period of time elapses.

So it’s usually two to four years. Wyoming has a four-month statute of limitations.

In the context of fraudulent transfers, uh, what I understand that is, for example, somebody sues you, and now you know you got sued, and then you move money into a trust. That’s, that’s what’s considered A fraudulent transfer, correct?

Exactly.

And so what you’re saying is that in South Dakota, for example, um, that fraudulent transfer may be, that may be the case, but they have a four-month, uh, I guess a, a period of four months where if, if no one calls them on it, then it’s not a– they’re not gonna recognize it as a fraudulent transfer?

Yeah, that’s what would happen in Wyoming. I’m not sure what the, what the statute of limitations is in South Dakota. It’s usually-

Oh, I thought you… Okay, I thought you said that was in South Dakota, sorry.

In Wyoming.

Interesting. Um, so why else– So that’s in Wyoming. Uh, you see a lot of activity also in Nevada.

Uh, is that similar to Wyoming?

Uh, I think Nevada has a one and two-year statute of limitations on, on assets, on the transfer of assets. One, that’s to known creditors, two years is to unknown creditors. So y- you know, if you haven’t initiated your, uh, lawsuit by then, then you can initiate your lawsuit under the sta- statute of limitations on the Fraudulent Transfer Act.

You know, fair enough. This would go, the difference between planning and reacting. So if you’re planning something and you articulate what it is that you’re doing and you’ve got all the basis for doing it, the law recognizes that much more readily than if you’re chasing, if there’s a creditor chasing after you and you’re throwing your money into a trust trying to get away from

it.

Well, it sounds to me like you’re saying if you’re reacting, turn to Wyoming.

Yeah, that’s probably about right.

Yeah. Yeah. Well, that, that makes sense. Now, um, let’s, um, let’s talk a little big picture here. Who’s, who are these trusts for, really? I mean, at l- what level of wealth do, should people start thinking about, you know, these kinds of trusts?

Yeah, if you take a, a look, if you’re $2 million or more exclusive of your house and your retirement funds, and you’re in a high-risk profession or a high-risk business, that’s the type of asset protection planning you’re looking for. Um, I also think that, you know, for family planning, for legacy plan- planning, for articulating yourself into the next generation or the next two generations with a family business, it also works really well for that as well, because it protects you from those outside influences called divorce, divorcing spouses, your kids, your grandkids, that sort of thing, because you don’t want somebody who doesn’t have a relationship to the family to have access to the trust after they’ve severed the relationship with the family.

Yeah. You spent time on the other side, basically as a bankruptcy attorney challenging these things, right? Like, to see where they can unravel. Tell us about where they unravel. What are the most common, uh, things that, that happen to make these things unravel and l- you lose your protection?

Yeah. You know, when, when, when you transfer all of your assets into the trust or you don’t leave enough assets outside of your trust to live on, you’re gonna have a problem Okay?

So you, you transfer everything in. So then if you, if you go down to Wendy’s and have a burger, you’re using your credit card from the trust to pay for your burger. And it just, you know, you, you just see this sort of co-mingling and penny ante stuff all the time. There was a guy out of California who transferred his business into the, into the, into the, uh, trust.

He transferred his residence, he transferred his commercial property, and then he lived in his residence rent-free, didn’t even pay the trust for the rent. And then he conducted his business out of the trust, didn’t pay the trust rent. He had his girlfriend living in one of the rental properties, and she didn’t pay rent.

And every dime that he took out of the trust was every dime that he spent. And it was just like, you know, but $10, $20, $30, $100, $1,000 all came out of the trust pretending like, you know, this thing’s gonna protect it. So there was just no efficacy to the trust. He didn’t treat it with any respect. So what I tell my clients is, “Leave your house.

If you’ve got a, if you’ve got a homestead exemption, leave your house out of the trust. You don’t need to put your house in the trust.” Probably can’t protect it anyway because no f- no court in Florida is gonna recognize an asset protection trust against a creditor in Florida on a homestead. You got a $10 million exemption, leave it there.

So, you know, and then keep enough money outside of the trust so that you can live on a day-to-day basis, and you’re not going to the trust every month trying to take something out of it. And those are the cases that generally fall apart. It’s the same with corporations and LLCs. You can use the same analysis.

Is it just a fiction that you created for legal purposes, or did you actually treat it respect as a separate entity?

So let’s talk about sort of your typical structure, what you like to do for, you know, your run-of-the-mill surgeon who meets these net worth criteria and all that. So, you know, what, what do you like to structure for those people?

I’ll put them into– Typically, I put them into a non-grantor trust because they have a tendency to have a lot of upward mobility in terms of the money that they’re making. And so, you know, the max tax level of the individual versus the trust level is not a concern for them. Asset protection is much more of a concern.

Uh, and you also look, you know, I, I hate to say it, it seems to me like people in the medical profession that are these high-intensity surgeons and whatnot have a tendency to really have, uh, I would say issues with– They get a lot of divorces, uh, for whatever reason. They seem to be into and out of relationships.

I think it, it’s-

Sure …

I think they’re just on edge, you know. Incredibly intelligent, incredibly driven, very difficult people to deal with, uh, on, on a day-to-day basis. You know, you can be friends with them, you can do that, but, you know, living with them every day is tough. And so, uh, those are the people really that I think for the most part it works really well for.

And but, you know, if you structure it before you start getting hit with lawsuits, you’re gonna be way far ahead of it, and you can put your assets in there and generate their wealth And I’ll give you an example. Like New Jersey says they have a strong public policy against asset protection trust, but I represented a doctor and his family out of New Jersey, and they put together a legacy trust involving their three adult kids so that they all put all of their assets into that trust.

Well, six years later, she sued for the divorce and said, “I get half of the trust.” And the court looked up and said, “Wait a minute. You voluntarily entered into this trust. You voluntarily transferred these assets into the trust. No one defrauded you. So you’re dealing with your three kids and your husband.

You get half. You will get the distributions out of the trust as and when they’re declared. And if they violate the terms and provisions of those trusts, you can sue as a beneficiary. But you entered into that.” So she didn’t get half. She got her distribution out of that trust on a, on a, on a month-to-month, year-to-year basis.

But I gotta tell you, you know, if she had taken that money out of that trust and invested herself, she would not have done as well as he did. That’s my opinion. Mm-hmm. And she continued to get her share out of it, so I actually think it worked out really well for her in the long run.

Yeah. It’s interesting.

Uh, well, first of all, a little anecdote. You know, I started out, uh, I started out as– Well, I am a surgeon, uh, and I, my, uh, background when I first started out in, a- as a neurosurgeon, actually, and, um, I remember, uh, in medical school, my, uh, department of neurosurgery that was there had over 100% divorce rate.

When one isn’t enough. Yeah.

I think the chairman had married at least two, uh, former Miss Texas, uh, which was, uh, which was kind of funny as well, but, uh-

Oh, and then there was

Miss

Ohio.

But it i- it is interesting, though, that, uh… It is interesting that people don’t think about trust in the context of, of divorce, right?

I mean, it, it is a, it’s a big one.

Oh, it’s huge. I tell these doctors coming out of med school, “You’re, you’re naive to think that you’re not a bit of a target.”

Yeah. Yeah, absolutely. One other issue that comes up a lot, um, when people think about trust, when they hear about trust, and they hear about irrevocable trust, is, “Well, I’m gonna lose control.”

So how do you control– How do you, how do you, how do you not lose control?

Oh, Wyoming’s unique. We have what they call a private family trust company. So you establish an LLC in Wyoming, you domicile it there, and you file a, uh, certain amendments to the trust with the secretary of state that run through the banking commission.

And so you’re an unlicensed but registered private family trust company. The private family trust company is recognizable as a trustee of one of these qualified Spender trusts, and you can make the grantor of the trust the manager of the private family trust company.

Yeah.

And so you hold the interest in that private family trust company through a specialized trust, and the family maintains, through their trusteeship, the control of that PFTC.

So that’s how you maintain what happens within that trust. And there’s two aspects to the trust that you, you’ve got to be aware of. One is the investment advisor. You can establish an investment committee within the trust, and they’re in charge of, of investing the monies within the trust and providing for that, takes that responsibility away from the trustee.

And that way you can go out and you can hire someone to do that with your oversight, if that’s what you want to do. Put them into brokerage accounts, manage financial accounts, that sort of thing. Takes the onus off of the PFTC. And then you have for distributions, and if you work this correctly, underneath these LLCs with the trust, you can take your compensation for services from those LLCs under the trust.

You don’t have to go to the trust for distributions, ’cause that’s– every time you take a look at a trust, any trust attorney who’s attacking a trust will say, “Let me see what went in and what came out.” And if they look at it and said, “You haven’t made a distribution in five years?” And the answer is, “No, we took a management services organization together to manage all these things.”

They took their compensation from that in accordance with the trust co- with accordance with the corporation code and the internal revenue code. So you’ve touched all the bases at that point, and you’re not taking any distributions out of the trust. Where are they going to attack you? So that PF- Sure … TC with an independent discretionary distribution committee.

So this is the interesting thing. You as the PFTC, managing the PFTC, hire my law firm to act as the DDC, the discretionary distribution committee. I have absolute control as to whether or not I ever make a distribution to somebody who requests one. Now, why would I not? But at the same time, I could. So that’s what differentiates that asset protection trust from anything else, because the creditors can’t force you to make a distribution out to a beneficiary.

They have to come to Wyoming and try to force me, and I’ve got a statute from Wyoming that says, “We’re not gonna recognize that lawsuit, and if you come in with a judgment and sue the trustee or t- sue the DDC, we’re not recognizing that either.” So it gets rid of that what they call a squeeze play.

So there’s a couple things that people kind of know about in general, too, in the big picture, and obviously you’ve represented, uh, creditors from the bankruptcy side, which is sort of inevitable.

You’re gonna be digging into those, uh, financials. But there is also a big picture deterrence element here as well, right? Can you talk a little bit about the role of trusts when people have trusts in terms of deterrence for creditors?

Oh, I can give you a specific example. Um, we represented a, a real estate company that was in Ca- based out of Denver, Colorado.

And prior to the COVID disaster, they had, um, a s- they had opened up a, a beautiful restaurant on behalf of a guy who was a, a great entrepreneurial chef. Nothing but success. Then COVID hit, so he walked away from the lease. So he had signed, he had put guarantees and whatnot, and my client went in and skip traced him.

What does he own? He doesn’t own anything. Well, what do we do? I said, “What, what has he done and what do we do?” So I said, I looked at him and said, “Well, I, I have a pretty good idea what he did, and if you go after him, you’re probably not gonna get much out of him ’cause you’re not gonna find anything you can get to.

So you’re best- Right … just writing the thing off and getting on with your life.” So my client said, “Well, no, let’s go exactly, what did he do?” So-

Yes …

I ended up doing a trust for him, too. So-

That’s great …

you know, there you go. Yeah. Big sales, big, big, an easy sales pitch.

Yeah. Interesting stuff. How can people reach out to you, uh, get in touch with you and, and, you know, understand kind of what their options are if they’re interested?

Yeah. Um, I’ve got a website, wyomingtrustattorney.com, and, uh, you go on there, there’s a lot of information, a lot of very good information. I’ve tried to make it easy to understand and easy to read, keep away from all the legal ties. So you go to wyomingtrustattorney.com. There’s a banner there. You can reach out and you can book a consultation with me.

Fantastic. Thanks so much for being on the show, Mark.

Buck, you’re very welcome. Thank you for having me.

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Welcome back to the show, everyone.

Hope you enjoyed it. Yes, uh, trusts are critically important. They’re, uh… And, and, you know, like, like Mark was saying, it’s not something that’s really only for the ultra wealthy.

It’s, you know, if you’re, you’re growing your wealth, that’s the best time to set these things up, and they may seem like overkill, but you know what? If y- if you’ve got, um, if you anticipate that you’re gonna continuously make good money in the next several years, you’ll be amazed at how much net worth you will accumulate, and there are lots of issues to think about, such as protecting it from creditors, divorce.

I hate to say it, it’s a, a tricky thing, but trusts will help you there. And also, of course, uh, in, in the case of estate taxes, hopefully you will have that problem sometime when you die. That is it from me this week on Wealth Formula Podcast. This is Buck Joffrey signing off. If you want to learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheelwright and Ken McElroy.

Visit wealthformularoadmap.com.