At some point during a lawsuit, the lawyer suing you is going to want to know what assets they can take from you. You’ll have to lay out everything on the table to let them know what you’ve got to lose.
What will be on that table varies greatly if you have a trust based protection plan or an LLC based plan.
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)
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Howdy friends. Colin Ley here. I’m an attorney at LayRoots, which is an amazing asset protection law firm. Today, I wanted to highlight one of the very big differences between trust-based planning, asset protection trust, and LLC-based planning. And I’m doing it in the context of something that’s very scary for people if they are ever involved in a lawsuit. So say somebody decides to sue you for whatever reason, there’s a part of the lawsuit when the creditor gets to find out all of the assets you own. Basically, they wanna know, are they gonna get paid? Is there a way for them to collect if they go through all of this trouble, because the way our legal system works is attorneys take these contingency fee cases. They only get paid if they win. So obviously to take the case, they wanna make sure they can get paid. And traditionally, this, I think it’s called meeting of creditors, comes at the end of lawsuit. Say they win a judgment against you, and then they drag you back into the court so you can lay out all your financials, all your assets, basically putting everything on the table so they know what they can take so they can get paid. But oftentimes now that comes at the very beginning. So say you get the threatening letter, the initial claim against you, some old granny shows up on your porch late at night, asks if you’re so and so, and when you say yes, she shoves a stack of papers in your hands and you’re being sued. And these attorneys don’t wanna wait to the end to know whether they will get paid or not. So what they do is they try to have that, that meeting of creditors, basically the analysis of what assets you have at the very beginning before they get started, so they don’t waste their time. So here’s the table here. Here’s the table that you’re gonna show up to and put all of your assets on there so they know what they could take. So, I’ve got some props here. You got your home, say you got your rental property, and your cash money in brokerage accounts. So we’re simplifying things here. There’s a lot of exempt assets, maybe your retirement accounts, your IRAs, that sort of thing. Those aren’t gonna be something. Those might not be, depending where you live, something a creditor could take. But these are some common assets that we see that people have that they really don’t want to lose. So you got your home here, you got your money, you got your property. So own all of these things in your name, and these can be taken away. Your home could be sold at auction, your account could be seized, same with your rental property. Now, start doing these first steps of planning. Maybe somebody is looking at LLC, maybe they’re debating LLC-based plan, trust-based plan. Let’s highlight some of the differences. So, we’ve got our entities here. We’ve got our asset management LLC. We’ll call it maybe a holding company type of thing, umbrella LLC, many different names, and we’ve got a little sub-LLC. What happens, people show this rental property, their sub-LLC, and then they take that, they put it in their asset management LLC, take your brokerage account, put that in there as well. Now, show up at your meeting with these attorneys who are suing you, you don’t know what you have, and so now you’re showing up, “Well, I own this LLC. It has my brokerage account, it has a rental property in it, and I have my home. I kept my home in an LLC because it’s my business and it’s not gonna really do you any good that way.” You still got these things to lose. You could lose this. Maybe you already argue for a charging order protection, and you’re hoping that if you can weigh them out and you won’t need the assets inside of here, something like that, or maybe they talk to a judge about a turnover order, because this is still an item of personal property. A judge could order you to turn it over if they wanted, if that’s the result that they wanted. So this provides some protection, but you still can be vulnerable, you still can’t lose these assets. So this is the big step up from LLC-based planning to trust planning . Let’s pull out our trust here. Boom! So we got our trust. I’m gonna take our home, put it in there. I’m gonna take our LLC, shove all this in there. So this is the big distinguishing feature between an LLC and owning a trust. A trust is going to sever that personal ownership. So you own that LLC personally, it’s an item that you own, but put things into a trust and it severs that link between you and the trust. So no longer do you legally own the assets that are in the trust, but you still get the benefit, you get the use of these items with a properly set up trust, you can even be in control of the trust in certain circumstances. So when you show up to that creditor meeting, or potential creditor meeting, that trust is not on the table. Now, you got this empty table here. When they ask you if you own a home, “No I don’t own the home. I don’t own that brokerage account. I don’t own that LLC, I don’t own that rental property.” It’s all been put in a trust, so you don’t have to tell them that you own those items. Showing up to that table with those attorneys, once you have that trust-based plan set up, you have your assets in there, your table is cleared. And why is that important? Because when there’s nothing on the table here, those attorneys are not gonna have an easy payday. So either one, they go away, the lawsuit’s dropped, it’s not worth their time. Or you then have a ton of leverage to turn around and say, “Hey, take my insurance policy. They’ll pay you off.” They’ll go away. Or maybe you pay them a little bit on top and say, “Hey, I’m not gonna give you the million dollars you’re asking for, but here’s $10,000, please be on your way.” That’s the idea. That’s the difference, big difference between trust-based plan and an LLC-based plan. And Hey, if you’ve watched this long and you are wanting to set up some sort of asset protection plan like that, you have questions about your planning, please visit livemorecarefree.com, set up a free initial chat with us here at LayRoots. Again, that is livemorecarefree.com. Thanks for watching. See you next time.