Buck: Welcome back to the show, everyone. Today, my guest and Wealth Formula podcast is familiar to, at least to most of the people who have been part of the Wealth Formula community for a long time. Doug Lodmell, who is my friend and my asset protection attorney. Doug, welcome back to the program.
Doug: Thanks. Great to be here.
Buck: We were talking offline about how some of these things that we talk about, we’ve talked about before, and on important concepts. So there is a little bit of a redundancy in what we do. But I think it’s important, particularly for the concepts that I feel like sometimes neglected, like asset protection. And that’s what you do. So let’s start very basic here. How do you define asset protection?
Doug: Yeah, that’s a really great question. That is a great place to start. What is asset protection? The broadest, most generic answer is anything that would protect your assets from loss, a creditor. So there’s a lot of investment advisors that say, yeah, I really focus on protecting your assets. What they mean is protecting your principal from loss by not investing in bad stuff. So that’s what they mean. Insurance companies, insurance sales, people, they talk about protecting your assets, and they might mean protecting your assets from taxes. So we sell your insurance policy that’s going to pay the taxes. When I say asset protection, what I mean is, in a legal sense, is how do we protect your assets from a creditor? And a creditor is anybody who might use the legal system to try to get assets from our side of the table to their side of the table.
Buck: So when you start, I think anybody who I’m guessing you have this question, you know, all the time, which is, at what point do I need to do anything special? And what are those things? I imagine what you’re going to tell somebody who’s just out of training or professional school and who’s got no assets, but all of a sudden is starting to make, you know, make a decent salary all of a sudden is making for $500,000 a year is different from what you tell somebody who’s accumulated net worth of a million, 5 million, 10 million? So how do you go about that when you have a new person who you’re talking to? Invariably, you’ve gotten that question a million times. What do I need?
Doug: Yeah. Well, the answer is, if you don’t have anything yet, let’s say you’ve just got out of professional school, you’re in debt. Even maybe you have some school debt. You don’t really need asset protection yet, per se, because you don’t have any assets to protect. The minute you do have an asset to protect, that’s when you start thinking about asset protection. So for some people, that asset is, oh, I’ve got $50,000 of equity in my first home. All of a sudden, I’d like to talk to you. So that’s great. We look at that. And 50,000 may not be enough to spend money on a legal structure to protect it, but $250,000, maybe. What I do first is I go through their assets. What a call looks like an initial call with me is let’s talk about your assets. Do you own any real estate? Do you own any investment properties? Where does your income come from? Do you have any employees? So what I’m looking for is both assets and risk points. I want to understand the assets. How are they structured if you bought, let’s say someone has three rental properties that they bought, and then they switched over and started doing Western wealth deals. And then they have five syndications. Well, those are different types of assets. So the three rental properties that they own directly, we would treat differently than the syndications because the syndications are already securitized, so to speak. In other words, they’re only a limited partner or an LLC member in the Western Wealth deal, whereas on the real estate, they own it. And so we have to do something about that. So step one is just lay it all out on the table so that I can understand it. Frankly, it helps them a lot of times because they haven’t really thought about it all sitting in front of them. They’re just kind of doing it and making it up as they go. And then from there, we look at what’s already protected. So we say, okay, great. Well, you do have $250,000 of equity in your home, but you live in a state where you have $200,000 worth of homestead protection or $500,000 worth of homestead protection or unlimited homestead protection. So that’s already protected. And that’s a huge thing for someone to understand when they go from feeling like, oh, I wonder if this is at risk to oh, it’s actually not at risk. Just understanding that.
Buck: Yeah. And so there are layers of this, too, right? I mean, we talk about asset protection. First of all, I guess one of the questions is, who are you protecting this from? What’s this asset protection. Who’s after your assets.
Doug: Right. So the answer is nobody. And everybody. And it kind of goes like that, goes from nobody’s after my assets to everybody’s after my assets. So I just had a call with a guy before you, and I got on, and he owns a smoke shop where they sell vaping stuff and going for years and years and years, never a problem. Didn’t ever think about it just going along, building assets, kind of using LLCs sometimes. Not other times. No coherent, no real plan to the deal. All of a sudden he gets a lawsuit, a battery exploded in somebody’s pocket. And now all of a sudden he’s on the hook. And he realized that business didn’t even have an LLC around it. It was absolutely, totally exposed. And now he’s going from no fear. I never think about it, to I need to absolutely go into crisis mode around this. So our legal system is the most litigious in the world. There’s no legal system that’s built like ours. Nowhere in the world. Number one problem with our legal system is that we do not create a financial risk for someone to sue someone else. Every other developed legal system in the world creates a financial risk. And what that risk is the risk that you’ll have to pay the legal fees of the winner. So this is called a loser pay system. So if you see somebody in England or India or Canada or Australia or any of the other developed countries in the world, basically anywhere in Europe, and you lose, you got to pay the guy’s legal bills because you dragged him through the mud. You made him spend two, three, four, $500,000 in legal bills, and then you lost. Well, you got to make them whole. And that’s why the world lawsuits are here. We don’t do that. If you see somebody, they spend half a million dollars to defeat you and you get sent away. You don’t have to pay them back to half a million dollars. There’s no penalty. And so that fundamental part of our legal system has made it very, very easy for lawyers to put billboards all over town saying, hey, feel bad? Injured, tired at work, sick, coughing from a cruise, injured on a cruise. It’s just rampant. Phoenix, Arizona. Scottsdale, Arizona, where I live, probably eight out of ten billboards are injury attorneys.
Buck: Nice. Again, just sort of layers of protection. One is nonstructural, and that would be like insurance, right? Insurance, equity stripping. What are some of the simple things that you don’t think that actually are creating asset protection for you?
Doug: So number one is insurance. I mean, most people when they think I’m protected, what they mean is I have insurance, and I feel like that would cover me. So I’m actually a fan of insurance. I like it because it’s easy to handle the straightforward stuff. It will cover you for the straightforward stuff. Car accidents. It’s great for accidents related to your home, property liability, things that are easy to insure, like vehicles and homes. Insurance usually covers. So I think that is your first line of defense. And in the beginning, that really is probably your only form of asset protection. You don’t need a lot of other stuff, not having a lot of equity in certain things. Also protect. So if you have a $4 million home that you owe $3.5 million on, you only have $500,000 at risk in that home. You don’t have $4 million at risk because you owe 3.5. So that limits the real risk that’s there. A lot of people will use debt to make sure that pretty much everything that’s out there in the world is leveraged as highly as possible. Then the question becomes, well, how do you protect the other stuff? How do you protect the cash that you’ve now pulled out of all this stuff? And that’s where you have to get into some other strategy. in some States, insurance is an option, not insurance, as in liability insurance, but insurance as in life insurance. There are some States that protect an unlimited amount of your life insurance whole life cash value. For example, I work with one company who called me and said, we pretty much do asset protection using whole life insurance. But we can only do it in the States that have unlimited protection for whole life. They want to partner with me for the States where they don’t have unlimited protection. So it’s very state driven, Buck. California is very different than Texas, which is different than Florida, which is different than New York.
Buck: Yeah. You know what’s interesting is it reminds me of some conversations we’ve had within our private network. And there’s always this tension for people when they have homes. And whether the psychological part versus what makes sense in terms of paying down and owning your home outright, say you have a house that’s worth $5 million, like you said, or you got a million dollars of equity in there. Is it smart to keep paying down that principal? Well, in many ways, the situation is complicated. It’s a complicated question. So psychologically, you may feel better that you don’t owe a lot of money on it, but the more equity you have in that house, the bigger target you are for creditors, the bigger target you are for people suing you. And in addition to that, the more likely you are that if you got into some financial trouble that a bank would actually foreclose on you instead of trying to figure out how to work things out. So it’s interesting that you bring up life insurance, because one of the ways that we’ve been talking about strategically in our group is we do a lot of what we call, Wealth Formula Banking and whole life insurance stuff. But the concept of taking that principal that you might have used to continue to pay down your home and actually put it into an insurance account. And, of course, that’s relevant, again, based on the state that you’re in. But that’s a concept that we’ve talked about. So when you get into some of the legal structures first, I guess the first thing that people talk about and think about are creating entities. I want to talk to you about what really is the protection that you get from legal entities, LLC, and obviously, it’s going to be determined in part by what state your LLC is and all that you want to talk a little bit about, how does an LLC actually protect you and what does it protect you against?
Doug: Yeah. That’s a really good question because there’s this kind of like, yeah, get an LLC. You’re protected and understanding how and the limits of that protection are important. So the reason that an LLC is seen as a protective entity is because the remedy of a creditor for a member of the LLC, a member being you, you own the LLC, you’re a member is a charging order. So if you have a Corporation and you have shares of stock, that’s personal property. So I want you to think about Apple stock or Google stock or Facebook stock. If you own that stock, you get a stock certificate. If you have a creditor, that creditor gets a judgment against you. They go into court and they go, hey, he’s got a stock certificate. That’s personal property. I want that to satisfy this judgment. There is no restriction on that stock certificate. It can be freely traded between anybody, and it can be grabbed by a creditor. Now, I want you to think about a country club. A country club is a private membership organization. You cannot bully your way into a country club. You cannot force your way in. You have to be invited in and you have to meet the qualifications. Right. And you can be kicked out at any time if you don’t follow the rules or if you are depending on what their documents say for no reason at all. So you can’t just see somebody’s country club membership and say, oh, well, you owe me the money because the country club itself is going to say, you’re not a member. This guy is a member. We let him in. We didn’t let you in. And this membership is valueless to you. So now how does that apply to an LLC? Well, an LLC does not have shares of ownership. It actually has membership interests. And just like a country club, those membership interests can be restricted. And in the state drafting of the LLC statute and the limited partnership statute, by the way, they’re very similar. They’re both charging order protection entities. The statute in the state that drafts the LLC actually says that the membership interest can be limited and can be restricted so that a creditor can never become a member of the LLC. And then when you draft the operating agreement, you’re going to make sure that you’re referencing that, and you’re making it clear that a creditor can never be a member of the LLC. So now you have a creditor. Creditor comes in and they say, hey, I see that Buck got this LLC membership interest that’s worth a million dollars, and we want that to satisfy this judgment. Now, it’s just like the country club, we can say, well, that membership interest is not available to satisfy the judgment. The legal the statute in the state actually doesn’t allow you to foreclose on the judgment and get to the underlying asset. It only allows you to have a charge against that member’s interest. And that is what a charging order is. It’s a charge against any distributions you might get in the future. But it is not a right to foreclose or a right to seize the membership interest. That’s why corporations are not great asset protection vehicles, because you can just have the creditor see the corporate shares, whereas limited liability companies and limited partnerships are very good asset protection entities, because the creditor cannot seize the shares and get control of the company or foreclose on it.
Buck: So when you say charging orders, can you define that a little bit?
Doug: Yeah. So it’s an order of charge against that membership interest, that members interest. So it’s like a lien, almost. It’s like saying, hey, if that LLC makes a distribution to this guy, then the person holding the charging order would be entitled to the distribution. But it doesn’t force the LLC to make the distribution, at least not under normal circumstances. I want to caveat all this. All this is subject to some judge saying, yeah well, normally that’s all true, but in this case, we’re not going to follow those rules.
Buck: And that’s where your planning comes in in your paperwork and all that. Some States have better charging orders than others. What is that? Tell us a little bit about that.
Doug: Yeah. So the LLC was basically invented in the late Seventies and the Eighties. It started getting adopted by the various States. It was an attempt to actually make a better entity, because prior to LLC, all we had was corporations. And most people had to use an S election to avoid the double taxation. And we ended up with S corporations pretty much everywhere, as corporations are very restrictive one. There’s still corporations and creditors can still seize the shares to their restrictions on ownership are very onerous. So you can’t own an S Corporation unless you’re a person or a special type of trust. So they’re not great for protection vehicles because of those two things. So some States actually said, well, let’s make up something better. Let’s create something brand new. And so Wyoming was the first state to draft a statute and says, well, let’s make a company that’s really based on a limited partnership because limited partnerships do have all these good things about them. But let’s call it a limited liability company because we want to make it a company, not a partnership. And that’s where the LLC got invented. And the States that we’re serious about making these asset protection vehicles said in the statute that the exclusive remedy for a creditor against a limited liability company is a charging order. That’s the key language. Exclusive remedy is a charging order. Other States like California have adopted the statute but said that they don’t have the exclusive remedy language. They say that a charging order is the normal remedy or any other such remedy as a judge deems is appropriate. In other words, a left discretion for the judge to say, well, charging order normally would be. But in this case, we’re not going to use a charging what we’re going to foreclose on the LLC. And so some States are better than others. As you can imagine, the States that are better are the States that are better on all the other corporate things, like Wyoming, Arizona, Nevada, Delaware, Alaska, the Western States that are kind of live free or die, get off my land type of States. California is the exception. In the West, California is completely different country than the rest of the Western States. Utah is a good state. So when we set up entities, if it’s possible, we like to use one of the good States. Now, here’s the trick. And a lot of people don’t understand this. If you live in California and you have property in California and you create a Wyoming LLC to hold the California property, thinking, oh, well, Wyoming has exclusive remedies charging order. So let’s use that. And then you come to California and you put your rental properties in a Wyoming LLC. You have done two things. You have domesticated your LLC from Wyoming to California that has subjected that LLC to all the rules in California. And when a California judge is going to get that case, what law are they going to apply to that Wyoming LLC? California law. So your LLC holding a California asset is just like a California LLC. So there’s no real benefit of using a Wyoming LLC to hold a California real estate
Buck: So the next, especially if you live in California, is this concept where you start using trust or, you know, other ownership other than yourself. The concept of sort of, you know, controlling, but not owning, right. And so presumably you can think that on a very basic level is okay, well, maybe you don’t own it, maybe somebody else owns it. But maybe the next question, maybe for you to clarify for us, is the value of a trust in the sense that my understanding, of course, I’m not an attorney, but just I talk to you guys all the time is that the law really recognizes two types of ownership. You’re an individual or there’s a trust, right. Like you can have a trust who’s not an individual. Can you talk about that recognition from the law, the level of individual and trust?
Doug: Yeah. So trust is a really interesting form of ownership because no one owns a trust, there’s no owner to a trust. There’s no shareholder. I get the question all the time. Well, who’s going to be the shareholder of the trust? There is none. There’s no shareholder. So let’s say that you’re going to take my son to the park with you, and I say, hey, Buck, thanks for taking my son. Here’s $20. Get him ice cream or sandwich or lunch or whatever you want with the $20. But if he sees his friend there Joey, he owns Joey $10. Don’t give Joey the ten dollar out of this $20. This $20, we’re going to give Joey $10 from some other money. But this $20 is just for lunch. We just created a trust. I’m the settler of the trust. You’re the trustee of the trust, and my son is the beneficiary of the trust. And those restrictions I put in there saying, hey, don’t give Joey the $10. That’s called the Spencer provision. That’s saying, hey, and here’s some conditions upon which you should manage this money. So I could say, hey, buy him lunch. And if you eat lunch, get an ice cream. But don’t buy him candy, no matter what. Those are trust provisions which kind of put conditions around how the money can be spent. So there’s an asset of the trust that’s called the trust state or the trust assets. But there’s no owner of the trust itself. The trust is just an agreement between us as parties. Me, the settler, you’re the trustee, for the benefit of my son. So that’s an incredibly powerful concept when it comes to asset protection, because there’s nothing for anybody to seize in a trust. They can’t go, hey, this trust has shares. Let me get to the shares. The trust is just an agreement between parties. And when we do an asset protection trust,, we choose a jurisdiction which has statutorily laid out. Here’s all the things that we think you are allowed to do in a trust. And here’s all the ways you can protect from creditors, and they lay it out, and they make it incredibly, incredibly difficult for a creditor to reach those assets, even through the legal system.
Buck: So in this scenario now, I mean, I’m just trying to sort of inch people into understanding conceptually the way some of these things can be used. So before we talked about this first layer of protection and insurance, and then you get to the LLC and the individual. Now you’re hoping that the charging orders can protect you. Now, you might have a situation where you have an LLC, where the owner or the member rather, is a trust, but you might be the manager. So that’s a situation where you kind of have your cake and eat it, too, right? I mean, you can control everything, but you don’t own it.
Doug: Right. And that’s really what we get into the concept of a middle entity, which is like a holding company. So we’ll put a middle entity between. So let’s say all your LLCs are down here. You own different pieces of real estate and some businesses and maybe a boat or an airplane. And you have all these LLCs. You say, wow, that’s a lot of things to manage. Let’s just create one holding company that owns all these various LLCs, and then also, hey, let’s put the cash and marketable securities in the cryptocurrency in the holding company because I don’t want that in my name, because that’s at risk if it stays in my name. So the holding company is kind of where you’re getting to this manager concept. You can be the manager of the holding company or the general partner, depending on what type of holding company we use. And then the trust can be the owner. So the asset protection trust own the holding company, you can manage the holding company, and all the assets are in the holding company. Either directly if they’re safe assets like securities or crypto, or indirectly. It’s like real estate through LLC. And that’s really the structure. So it’s LLC owned by holding, company owned by trust controlled by you. And you do. You’re right. You do kind of get your cake and eat it, too, because you don’t technically own all this stuff directly, although you’re still the beneficial owner, because in an asset protection trust, you’re going to be the beneficiary. So the trust is set up for your benefit. So if you need to use the money, there’s no restriction. You’re allowed to use the money.
Buck: And I think that’s an important concept because especially when it comes to Estate Planning. And that kind of thing, when I have conversations with people, they’re always like, well, I don’t want to give up all my money, and I’m not ready to give up. You’re not giving up all your money. You’re still using it. It’s just a different way of thinking about it. So when you get to that, I think this is an important time to sort of talk about, you know, one of the things I always like about your style is that you’re more of a practical sort of street fighter type instead of being highly academic. And sometimes you talk to guys who just don’t even really understand what they’re saying. And it sounds like you’re taking some sort of a class in a law school, and that’s really not what this is about, right? You have this beautiful structure set up, you know, you might be involving offshore versus onshore and all those things which you might want to talk about. But then and maybe you can talk about that in the context of okay, now you’ve got a great big lawsuit. Are you bulletproof protected or maybe not?
Doug: So that’s a great question, because the concept of somehow bulletproof. Are you ever bulletproof from anything, even if you’re in a bulletproof tank? Well, no, not if an A10 flies over. So there’s no such thing as bulletproof. And that whole concept that somehow you can do something that just makes you invulnerable is really a misnomer. What asset protection if done right really does is it gives you leverage. It rebalances the playing field that is totally imbalanced right now in favor of plaintiffs and their attorneys and puts it back in favor of you because you get to choose the venue. You get to choose the field in which you’re going to have the fights. There’s no absolute in all this. But I can tell you if you look at the track record of how asset protection has worked when it’s done right, and it’s done timely, it’s incredibly effective. I mean, I would say 99 point something effective if done right. It’s just extremely effective, because once you get to the offshore, you’ve moved the game so far away from anything that the lawyers here even understand, much less the plaintiffs, that you’ve really taken away all the moves that they might be able to make. So I do like offshore. I really like to have it in the back pocket. I’m not a huge fan of going offshore all at once right away. And there’s a lot of attorneys out there, and this is kind of the academic they’ll say, well, offshore is the best. Let’s go to the Cook Islands to set up a trust. That’s the best. Let’s open your account. Offshore. Let’s get all your money there. Let’s leverage everything now and get it all off shore. Okay. That’s all true. Those things are true. But you’ve also exposed yourself to the highest level of compliance with the IRS, the most level of costs with the offshore providers, the highest cost banking system. And you remove yourself completely from the control element. And so from a practical standpoint, it’s not practical for most people. It’s really not. They just won’t do it. So you’re right. My style is very, very practical. What makes sense? And what is logical to do? Do I need to bubble wrap my kids when I put them in a car, or do I just want to have a child? So is it practical to bubble wrap your kids? Probably not. Is it practical to have airbags in your car? Yeah, probably practical. But I can say with confidence, if done right, it’s incredibly effective. I mean, incredibly effective. And I certainly rely on it every day for my clients.
Buck: Yeah. And so the bridge trust talk about a bridge trust, because that’s kind of what you’re known for.
Doug: Yeah. So the offshore Asset Protection trust is the gold standard when it comes to actually defending against the lawsuit. If you’re in the exact circumstance where an offshore trust is the best, which is not every case, there are cases where you do not want to be offshore, where offshore will be a detriment to you. There’s been plenty of cases where a client has called me with their criminal attorney on the phone and said, Doug, I told my criminal attorney I have an offshore trust, and he’s flipping out. Can you explain what I have and went in explaining is, no, you actually have the ability to have an offshore trust. But what you have is a bridge trust. And you can hear the sire relief on the part of the criminal attorney was like, oh, thank God. I think I’m going to keep this guy out of prison because the optics of having an offshore trust was absolutely going to kill him. So offshore trust, if it’s the right thing tactically to do in the right moment, that’s where you would want to be. But if it’s not, you don’t want to be there. So what is a bridge trust? It’s an offshore trust. It’s drafted as an offshore trust. It’s registered in an offshore jurisdiction. But for the purposes of compliance, it’s actually a domestic trust that’s why I call it a bridge trust. We actually cross. We construct a bridge back to the US. We meet the two part tests at fourth in 7700 and one and 30 E of the Internal Revenue Code, which is called a court testament control test. We make a court in the US have primary supervision over the trust, and we make a person in the US have primary control over the trust. That person is typically the client themselves as US person that meets the two part test, that eliminates the need for a foreign trust filing requirement for the 35 and 20 to have a foreign trustee in control of everything. It lowers the cost. It simplifies the maintenance. It allows the client to be in direct control of their assets. But it still gives us this ability if the proverbial shit hits the fan in the future, to just cross back over the bridge. And it’s a foreign trust. And now we have the strongest type of trust in the world. So it’s practical. It’s a very practical tool.
Buck: I’m curious, just out of curiosity, why would the foreign trust have really created a serious problem?
Doug: Because it was a criminal thing and having anything offshore from an optic standpoint. So optics are just the way things look. And the court very much is looking at the optics when they’re judging whether somebody appears to have done criminal stuff. So in this case, this guy was someone white collar. We’re talking about the SEC and Department of justice. And so they’re looking at his whole picture. And from his criminal attorney’s perspective, had he had an offshore trust with a Swiss Bank account with $10 million sitting in it, he would have looked like the bad guy, right? Because it just looks bad. And so he didn’t have all his money sitting here. He had a bridge trust, which has this ability to be offshore. But we never triggered it. And the criminal attorney was like, for God’s sake, don’t trigger this trust unless this guy is willing to go to jail.
Buck: It’s interesting to paradox, in terms of what you’re trying to do with optics at the level of insurance from asset protection insurance, sometimes, certainly, in my experience, invites litigation, right? If somebody is trying to sue you and they think, well, Medal Med Milt is a good example of that, right? You have frivolous lawsuits all the time, because a lot of people think that, well, they’ve got insurance, and then they’re going to ultimately settle this thing. Sometimes it seems like insurance actually invite the litigation, whereas on the polar opposite now, still acid protection. But what you’re doing with these structures, ultimately, I think my sense is that really what the great value is in these higher level things. When you got somebody trying to sue you is a deterrent because you have somebody you might want to sue you, but it’s going to be really hard to get your asset. So then they have to do sort of a benefit analysis for themselves, whether or not it makes sense to see you. Isn’t that a big part of asset protection?
Doug: It is a big part. I mean, nobody’s going around suing homeless people with no assets. There’s not. They’re never defendants in lawsuits. Why? Because there’s nothing to get. No attorney is going to take that case. Well, you look at a successful entrepreneur or a doctor, and you go, Well, that’s a good target until you find out they’re not. And once you find out they’re not that attorney. And that plan, if have to reassess the case. Because remember the way that the plaintiff system, everything’s greatest strength, is also the greatest weakness, right? That’s kind of the law of the universe. Right. You look at your own greatest strength is also your own greatest weakness, because there’s so much focus in that area. So the greatest strength of our legal system, from a plainest attorney perspective, is this ability to offer their services at no charge to these plaintiffs. So you don’t have to pay me anything. Just sign up with me. I’ll do all the rest. And we’ll go get you some money. That’s their greatest strength. They lobbied hard to make. That happened before 1964. They weren’t even allowed to be plaintiff contingent fee attorneys. It was not allowed. It was not in our legal system. The founding father specifically excluded that. They did not want an attorney working for a cut of the action. Well, the attorney successfully lobbied in 964 main was the last state to change the law that allowed attorneys to accept contingent fees. So they worked hard for that. And that’s what allows them to advertise and take every case that comes across the desk. Sign up, sign up, sign up. Sign it up
Buck: That’s what the billboards are for, right?
Doug: That’s what the billboards are for. They get these calls coming in. Let’s get these things signed up and let’s start suing. But it’s also their greatest weakness, because they’re not getting paid unless they win. And not even just if they win, if they collect. So they’re not getting paid until they collect. Well, you show that attorney, good luck collecting against my client. You’re not going to collect. Why are you doing all this free work? All of a sudden, their math changes, and now they have to reassess. Their strength has now turned into their weakness. And you’re right. That is a huge component of this. And we use it all the time. I write letters to my clients defense Council, explaining the plan, not in detail to where the other side would understand where to look, but explaining what it is. And then that letter finds its way across the table to the plaintiff’s attorney from my client’s defense attorney and says, hey, we really should be talking about settlement here, because I don’t think you understand. Even if you were to go to trial, get a judgment when there’s really nothing here beyond the insurance. And all of a sudden, insurance sounds good enough.
Buck: Yeah. Exactly. I wanted to talk a little bit about the other kind of stuff that we talk about sometimes, which is real. It sort of seems related to asset protection, but it kind of isn’t Estate Planning, and I know you’re focusing on asset protection. Doing asset production doesn’t really provide Estate Planning. Right? And what’s the difference? Because there’s a lot of confusion out there. Yeah.
Doug: So estate planning is planning for your death and what happens at your death? It also almost always involves estate tax planning. Meaning how do we make sure that we don’t pay any extra state taxes if we can minimize those? And estate planning is most commonly done through something called a revocable living trust. Very good about a revocable living trust. Is that because the trust doesn’t die? If you create a revocable living trust and you fund your assets into it, when you die doesn’t really disrupt the trust, the trust says, oh, well, you used to be the trustee, but now you’re dead. And we’re just going to go down to number two trustee who you’ve listed, and that might be your wife or your children or whoever. And so the trust immediately has direct control of the assets. You don’t go through probate, which is the legal process of submitting the will to the court and having it read and publicly advertise. And here’s the estate. And does anybody want to make a claim against the estate? Now’s your chance. There’s this whole process in California. It’s really kind of horrendous because the lawyers were successful there to lobby for statutory fees to go through Probate, which start at 3% of your state just for the lawyers. So that was nice of them to make that law for themselves. So it avoids that. But because the trust is revocable, there’s no asset protection.
Buck: Yeah. And that’s kind of what I was getting at, right. It’s a tricky thing because people are trying to get legal advice for me all the time, which I don’t want to go, like I said. So it’s good for me to have you here. But there’s always this question, do I need an LLC or a living trust? Okay. But they’re really dealing with separate things. It’s smart to do a living trust, but maybe you’re living trust own an LLC or something like that, so that you provide both asset protection and estate planning, right?
Doug: Yeah. Estate planning is important. You gotta do it. Asset protection you may need to do if you have assets, and if you care about protecting them, if you’re going to do them both, you’re going to want to do the asset protection as the primary thing. And the reason I say that is that if you do the estate planning as the primary thing, your estate planning attorney is going to have you put all these assets into this trust. And then you come to me, your asset protection attorney, and I’m going to have you take all those assets out of that trust and put them into a different place. So if you do the estate planning first, you’re just going to double up on your work. So what I encourage people to do is do the asset protection because you’re going to fund it completely differently. If you’re protecting assets because they’re not going to go into a revocable trust, they’re going to go into the LLC, they’re going to go into the holding company, or they’re going to go into the asset protection trust, the Bridge trust. They’re going to go to one of those three places. They’re not going to go into the revocable trust. The Revocable trust can then get done. And then what we do is we just pour the Bridge trust and all the assets from the holding company into the revocable trust at your desk.
Buck: So one of the things that people ought to know is Doug actually has a network of estate planning attorneys available, too. So I think this is a very important concept. These are very important concepts and very important, especially to people in our Wealth Formula community, because for the most part, your typical Wealth Formula person does have assets does have, in many cases, higher risk, because you might be physicians or other kinds of health care professionals or you’re a business owner. These are things that you’ve got to deal with. So it’s like insurance in the sense that okay, you’re setting something up just in case, but, well, you don’t want to get into that just in case scenario. And then, like the guy at the Vaping place all of a sudden realize, oh, my gosh, once you set these things up, it’s really not that hard. So it’s a matter of just being on the right course from day one. And that’s what Doug is really good at doing. Doug, how do we get in touch with you?
Doug: So you can email me directly anytime, if you’re one of your listeners. Buck, just my email is my name [email protected]. Just say I heard your podcast with Back. I’d love to talk. We can schedule a time and we can actually sit down. We do it on the phone. It takes about 30 minutes. We’ll talk about everything. And I can tell you if you need asset protection and what you need. If you just want information, you just kind of like to dig in yourself. I recommend you go to the website at Hotmail com. There’s a bunch of good videos, lots of helpful information, lots of articles. I really try to educate as much as possible. And then you can certainly call. You just want to call and make an appointment with me. My phone number is 602–230–2014. Happy to talk with anybody who’s listening to this and help you figure it out.
Buck: By the way, Lodmell is spelled L-O-D-M-E-L-L. So if you’re looking at Doug, make sure you spell that right. And the other thing I’ll point out is there is a webinar that Doug did for us a while back on Asset Protection that’s available at WealthFormula com. And if you click on the contact button after listening to that, you can also contact Doug that way as well. Doug, I want to thank you again for being on Wealth Formula podcast. It’s always a pleasure and I’m looking forward to seeing you in October at our next event.
Doug: Yeah, I’m looking forward to being there. Thanks Buck.
Buck: We’ll be right back.