Creating an asset protection trust is like building a safe. First you make the safe, then you have to lock your valuable items inside. (Bonus lesson: you can still take your valuables out of the “safe”)
Colin Ley is an asset protection attorney and the creator of the PREP Trust®. He is also the co-founder of LayRoots (along with with partner in life & business – Shreya Ley)
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An asset protection trust is like a safe
My wife and I have been traveling quite a bit recently, and on this last trip we took to Peru, we actually ended up in a whole bunch of hotels. We kept moving around every few days and changing towns and trying out different hotels. And whenever we would leave for the day, as you know, you might have experienced before as well.
You don’t want to leave your valuables in the, in the hotel room. So. You know, we’re shoving jewelry and computers, passports, all these different things into that little safe that’s in the hotel room, right. And you, you set the little pin code and, and lock your stuff up. And that, it got me thinking of how that symbolizes what you’re doing with an asset protection trust, like our PREP Trust that we set up for people to to protect their assets from, from stupid lawsuits. This is the process of setting up an asset protection plan that that has a great asset protection trust as part of it or a key part of it. The first thing you’re doing is creating the safe.
So think of that safe as the asset protection trust. So the first step is to, to build it, to create it, and then once it exists, it’s, it’s sitting there empty. Kind of like the safe in the hotel closet. The second step after the trust is established is to then move your different assets, accounts, properties, whatever you own that you want protected.
The next step is to move those assets into the trust. Put them into that safe. We call that the funding process . That’s getting assets into the trust, and that’s going to look different for everybody. Everybody owns different things. You know, we work with people who might just be starting in real estate investing and you know, maybe they just have their primary residence and they’re planning on acquiring some properties.
Some people already have a dozen properties spread out throughout the US. So there’s going to be some additional costs and work to get those different assets into the trust. And again, it looks different for everyone. You know, if all you own is your, your primary residence, you’re looking at creating a new deed that will change title from your name to the name of the trust.
If you have those different rental properties, you know, that’s gonna again, involve deeds. If you have, say, a brokerage account, right? You’re going to have to contact the brokerage. And you’re going to have to tell them, I want to have this account inside of my trust. So, you know, that typically just involves a little legwork.
If you own different LLCs from business interests, you know, that might involve some additional legal work to create the paperwork to transfer your interests and your LLCs, the stocks that you own. So that might involve some interest transfers some meeting minutes, maybe. It’s going to look different for everyone.
And that’s why, you know, when you’re, when you’re setting up your asset protection plan, that’s part of the budget. One part is building a safe, you know, creating the, the asset protection entities. And then the second part of the budget is how do you get all of those assets into the trust.