Most people that call our office are interested in asset protection. They are worried. Stressed. Waiting for the day that they will be sued and have their assets taken away from them.
[Read more…] about Who needs asset protection?How does an asset protection trust work?
An asset protection trust works by separating legal ownership from beneficial enjoyment of the assets in the trust.
The person who sets up the trust (the Grantor) transfers assets into the trust. The Grantor then no longer legally owns those assets. He or she has given up both legal ownership and beneficial enjoyment (also called beneficial ownership) of the assets.
Those trust assets are now legally owned and managed by the Trustee of the trust. The beneficial enjoyment (i.e. who gets to use or benefit) of those assets lies with the Beneficiaries of the trust. The rules for asset protection trusts allow for the Grantor to also be a Beneficiary.
An example of separating ownership
Take for example a $250,000 investment account. The account is in Mike’s personal name. He owns it outright. He’s the legal owner who calls the shots on what happens with the $250,000 and he also has beneficial enjoyment of the money. I.e. he gets to use it if he wants to. Mike sets up a trust and retitles the account into the trust. Legal ownership of that $250k now lies with the Trustee of Mike’s trust. Beneficial enjoyment of those bucks now goes to the Beneficiaries of the trust.
Great asset protection trust laws, like in Nevis or the Cook Islands, allow Mike to be a Trustee and a Beneficiary if he wants.
Flexibility for changes
The laws also allow for flexibility. The people or companies in these different roles of Trustee or Beneficiary can change. Mike can start as a Beneficiary of the trust, but later not be a Beneficiary if there were a legal threat against him. Who sits in the roles of Trustee and Beneficiary can be modified as needed.
To recap:
An asset protection trust works by dividing legal ownership and beneficial enjoyment between two different parties. Legal ownership of the trust assets goes to the Trustee of the trust. Beneficial enjoyment of the assets belongs to the Beneficiaries.
Colin Ley is an asset protection attorney and the creator of the PREP Trust® and Better LLC™. He is also the co-founder of LayRoots (along with with partner in life & business – Shreya Ley)
Being successful in America makes you a target for bogus lawsuits from shameless lawyers. We created an effective, asset protection solution, so you don’t have to worry anymore, happily knowing your family’s future is protected. Get started now by scheduling a free, 30-minute call at livemorecarefree.com.
Roadblocks
A big tree blocked the road out of our house today. It fell down during a massive wind storm. It made me think about the roadblocks I see in my work as an asset protection attorney.
1) Many people put up a big roadblock between themselves and setting up an asset protection plan. A roadblock between them and those of us who don’t have to worry about the threat of a stupid lawsuit.
2) Asset protection is about putting up roadblocks between you and the scheming attorneys who will make up anything to sue you and take your assets. The roadblocks discourage these attorneys from continuing. It makes them look for another victim.
[Read more…] about RoadblocksListen to the episode. (05:15)
Why we don’t recommend land trusts (part 2)
“What about these land trusts I hear about?” is a common question we get.
Land trusts are often promoted as a tool for beating a due-on-sale clause and for asset protection.
We don’t recommend them to clients because we don’t think they work for either of those goals. They give the illusion of achieving those goals, but reality is a different story.
[Read more…] about Why we don’t recommend land trusts (part 2)Listen to the episode. (04:56)
Why we don’t recommend land trusts (part 1)
“What about these land trusts I hear about?” is a common question we get.
Land trusts are often promoted as a tool for beating a due-on-sale clause and for asset protection.
We don’t recommend them to clients because we don’t think they work for either of those goals. They give the illusion of achieving those goals, but reality is a different story.
Listen to the episode. (07:05)
I hope you waste your money
Our power went out recently after a bad wind storm which kept Shreya up at night. I slept somewhat soundly except for when she woke me up by asking, “what was that boom?” (To which I mumbled something and pulled my covers tighter).
When we woke in the morning to a bad power outage and a large tree blocking our driveway – well, that answered that question. We weren’t alone. Around 500,000 homes had no power. And since we live in a rural area, we know we are lower on the list to get things restored after the cities.
It wasn’t too bad though at first. We have a back up power source to run the essentials (meat freezer/refrigerator/coffee maker) and some battery-powered lights and candles. On day two, though, the novelty wore off and things got worse. Our water supply ran out since the well pump was out of action.
Facing the annoyances of no running water, two days in, the power company said we’d have to wait three more days to get service back. We gave up and booked a hotel.
I was hesitant to book, hollering out to Shreya that “As soon as I pay for the hotel, you know that the power will come back on.” And “I just don’t want to waste money!” I clicked confirm anyway.
Sure enough, less than five minutes after I booked the room, the power came back on.
A couple hundred bucks was gone, but I sure was happy to be able to stay home. I was happy I wouldn’t have to live in a hotel down the road for a few days. I was happy our quarter cow wouldn’t spoil as the backup power ran out and the freezer shut off.
Yes, the money was “wasted” but for those 5 minutes, I was grateful to have a back up plan.
