Epic Real Estate Investing - What You Don't Know About Asset Protection Can Hurt You | 427

Episode Date: July 17, 2018

Educate yourself about asset protection before it's too late! Today on Tax Hacker Tuesday, Tim Berry shares some of his best asset protection tricks including new beginning trusts, spin theft protection, and much more. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, Rockstars, Matt here. Real quick, I just want to pass on a quick message. He's on, Tim's on vacation, and I want to pass on a message from him. He says it's been a pleasure working with you. Those of you that have decided to take him up on his offer to have your tax hacker blueprint created. And those that you have it, the offer still is open. Here's what you get.

You get a one-on-one consultation to establish where you are and where you want to go. You get a custom tax action plan organized into easy-to-follow steps so you can keep all the money that's rightfully yours. You get an asset protection plan organized into easy-to-follow steps, so you know how to protect everything that you want protected, and you get an accelerated retirement strategy so you can enjoy life while you're still young enough to do so. And you get quarterly check-ins all year long to keep you on track toward your goals. Normally, this is $3,000 a year for this level of planning and consulting with Tim. The introductory offer just for you as an epic listener is half off of that, so just $1,500. dollars. And if Tim and his team can't save you at least double that, then it's free. You pay nothing.

So go to taxhacker.com, grab Tim's free book on how to navigate the loopholes and Trump's new tax plan. And then after, you'll have an opportunity to schedule some time with Tim and his team and just let them know that you heard this offer here on the Epic Real Estate Investing podcast. Tell him you want your tax hacker blueprint and they'll take it from there. So go to taxhacker.com and everything you need, it'll be right there. And someone asked the other day, Why would Tim do this? Why is he offering to give money back and essentially provide free service? Well, this is how Tim finds new clients by offering a ton of value up front to demonstrate how he can help.

He offers it here each and every week asking nothing in return. And if you want to take the next step and create a direct professional relationship with Tim, he'll extend you that type of service even at that level as well. And so he just wants to demonstrate how he can help. and then he just puts the ball in your court to where you get to decide which direction you want to take. Sometimes it's a good fit. Sometimes it's a great fit. Sometimes it's not.

But either way, Tim will see to it that you are better off after that call than you were before. All righty. Now, on with the show. This is Terrio Media. Did you know that up to 50% of your lifetime income will be wiped out by taxes? What if you could stop this madness? Isn't it about time you play on a level playing field with? with the wealthiest 1%? Now you can. Tim Berry, attorney at law, shares here each and every week

current tactics and strategies that anyone can implement to hack the tax code. Protect your assets and keep what's rightfully yours. It's time for Tax Hacker Tuesday. A new beginning trust. What exactly is a new beginning trust? Well, a new beginning trust is a way to hold your assets, so it makes it very difficult for judgment creditors, those people who win a lawsuit, to take your assets away from you. And let's go into a basic concept of asset protection. And the basic concept is this. Whatever rights you have in property,

your judgment creditor is going to have the exact same rights. To put it a different way, they step into your shoes. Whatever rights you have, they have the exact same rights. If you have $100 bucks in your pocket and you can take it out and spend it anytime you want to, if you lose a lawsuit,

the person who won that lawsuit is going to have that right to grab that $100 out of your pocket and spend that money any way they want to. So our goal is to make it so that your rights and your assets are somewhat limited. Now, they're not totally limited. You're still going to have control, but you just don't have complete unfettered use of your assets. We want to make it so if a creditor steps into your shoes, those shoes are just a little bit uncomfortable for them.

Now, how are we going to do this? What we're going to do is we're going to utilize something called a trust. and a trust is basically a contractual arrangement between three different parties. We have the first party is the grantor of the trust. They're the ones who create the actual trust. They say what terms and conditions are going to be in the actual trust agreement. Then they also name who is going to be the trustee of the trust. And the trustee of a trust is the one who manages the assets of the trust.

They're the ones in complete control of the trust. And then finally we have my personal favorite role to be in is the beneficiary of the trust. The beneficiary is entitled to receive the benefit of the use of the trust assets. So this is the basic concept of a trust. We have a grantor who creates the trust. We have the trustee who manages the trust. And then we have the beneficiary of the trust. Now, the thing is, once you decide to do a trust, that's the starting point.

because not all trusts are created equal. Now, at the very least, we want to make sure that the trust has something called spinthrift protection. And what does spin thrift protection mean? Well, let's go back to the early days of trust. A lot of times, trusts were created by mom and dad because they knew they had a kid, let's just call them Jr., who went out and spent way too much money. So they wanted to be able to protect Junior from themselves.

So what they did is they created a trust and they said, Junior, we know you're a spinthrift. And so we're going to let you know right now that you only get whatever we want you to get from the trust. You don't receive any more than that. And not only that, but you can't borrow money based upon the value of the trust because the trust document's going to say you can't do that. So that's something called spinthrift protection. And in modern days, spinthrift protection is just some language inside a trust document that says nobody can take away the beneficiaries right to the trust assets. and nobody can place a lien on the trust assets. And key point here, in order to have a valid spinthrift trust in most states, the grantor,

the one who creates the trust, cannot be the same person as the beneficiary. And this is very important. So once again, in order to get the baseline level of asset protection, the spin thrift protection, the grantor, the creator of the trust, cannot be one of the beneficiaries of the trust. And let me give me an example of this. A lot of people, their knowledge of dealing with trust is based upon a living trust. And in a living trust, the grantor is the individual who sets it up. Then they are also the trustee.

And then they are also the beneficiary. Now, knowing what you know now about trust and spinthrift trusts in particular, does a living trust give anyone any asset protection? answer is no. If you establish a living trust, you are not going to have any asset protection. Once again, if you establish a living trust, a living trust does not give you asset protection. So what do you think we need to do in order to have the trust give you asset protection? Well, we're going to do a slight twist.

What we're going to do is we're going to go to your parents, mom and dad, and it doesn't have to be your parents. It just has to be someone who genuinely cares about you, someone who truly would set up a trust and put assets into it for your benefit. It can't be Joe the taxi cab driver down the street. That's going to be a sham. So what you do is you go to somebody who genuinely cares about you. And you say, mom, dad, what I would like for you to do is I'd like for you to create a trust for my benefit. So mom and dad are going to be the grantors of the trust. they're going to create the trust and they're going to put in the terms and the conditions of the trust.

Then they're probably going to appoint you. And this is the key point here. This is kind of a mindblower for a lot of people. A lot of times what we can do is we can say that you, you are going to be the trustee of the trust. So now whenever you go to make any decisions about how the assets are going to be invested, who are you going to have to ask for advice on? yourself. You're in control of the trust assets. Whenever you want to make an investment, you make the investment. You are the trustee. And the other cool thing, who's going to be the

beneficiary? You. You and your family are going to be the beneficiaries of this trust. So what we're doing is we're having mom and dad create a trust. They're going to sign a document. And by the way, a lot of people say, how much liability to mom and dad having this thing? Well, their liability is pretty much zero. They signed the document and they walk away. Then they leave the trust, the administration and the management of the trust to you. So now it's up to you on how those assets are going to be invested, how the trust is going to be handled, and ultimately you are the beneficiary. So now here's the cool thing. Now let's say that something awful happens and you lose a lawsuit and your judgment creditor comes after you. They can't touch the assets. Your assets, these assets

inside the trust, I said you're wrong there. The assets owned by the trust are not yours. You don't have complete unfettered control over those assets. You have to abide by the trust document. And if the trust document says those assets can't be assigned for the benefit of creditors, voila. They step into your shoes. You're bound by certain terms and provisions of the trust. They're now bound by certain terms and provisions of the trust. Now, this sounds incredibly simple. and it's not as simple as it sounds. I'm oversimplifying quite a bit here, actually. But let's get down to the basics.

Has this been tested and has this ever worked before? Answer is yes. There's been a number of cases in regards to these types of trust, but let's just go over one basic case that took place in bankruptcy. And in this case, what happened was this. Mom and Dad established a trust, and it was for the benefit of Junior. And Junior just so happened to be the trust.

of the trust as well. So if Junior wanted to go out and buy a shiny red Ferrari, all he had to do is talk to himself and say, hey, trustee, will you be so kind as to distribute money out of the trust for me to buy a Ferrari? And the trustee, who was Junior, would probably say yes. So Junior had control over the trust assets and he was the beneficiary. Junior goes into bankruptcy. The trustees, the bankruptcy trustee, they get paid on commission.

and they saw that Junior had about $120,000 inside this trust. So the trustee says, hey, Junior, just hand over that $120,000. I'd like to take it over now. And Junior says, no, I'm not going to do that because I have a spinthrift trust. My trust is not subject to the claims of creditors, and you bankruptcy trustee are a creditor. Well, bankruptcy trustee didn't like this one bit. And so bankruptcy trustee says, you know what, we're going to court. Well, the judge heard the case. He banged down the gavel. And guess what? The bankruptcy judge said the bankruptcy trustee was not allowed to take away the assets. Now, the bankruptcy trustee didn't like this. So he appealed the decision. And whenever it went to the appellate court, the pellet court looked everything over and said, you know what? Junior's parents created a valid spinthrift trust. Junior has limitations on what he can do with those assets.

assets. Bankruptcy trustee, you step into his shoes. You're going to have those same limitations. One of those limitations is he cannot use the assets and the trust for the benefit of his creditors. So bankruptcy trustee fly away. That's it for today as we dream of a tax system that works just for you. But until then, you have Tim Berry. See you next Tuesday for another episode of Tax Hacker Tuesday. Simons is here to make your holiday season magic. We've got thousands of gift ideas and festive decorations to help you turn your home into a winter wonderland with green boxes piled under the tree. So slip on a cozy pair of Christmas pajamas and hang up some new ornaments. The most wonderful time of the year starts at Simons.

You've seen Kelowna change over the years and it's growing faster than ever. The city is working to make sure enough homes are being built for people of all incomes, and stages of life. But growth isn't just about more buildings. It's about building community. Every new project helps us fund the things that matter most, safe and dependable infrastructure, transportation options to keep us moving, and beautiful parks where we can relax, play, and connect. Colonna is growing with purpose. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.