ASSET PROTECTION PODCAST | TRUST ATTORNEY LAS VEGAS
ASSEST PROTECTION PODCAST | TRUST ATTORNEY LAS VEGAS
Hello and welcome to the trusted the podcast where we talk about all things that involve Trust Attorney Las Vegas someone, especially attorneys. I’m your host, Blake Johnson. Today I want to talk about something I think everyone has thought about from in some form or another. And that is asset protection. Uh, as you may know, we live in a very litigious day and age and um, should you ever get sued, you want to make sure that you won’t lose your house or your shirt. Uh, just a quick statistic for you. According to the u s federal courts, uh, total filings of civil cases rose 6% from 2016 to 2017. That’s the most recent year that they had that, uh, those statistics available. So 6% increase. It’s still a growing, a number of filings going on each year. So how can you protect yourself? Well, before we get into, um, the actual asset protection, I want to give you a little history of how asset protection came about.
So, uh, going back all the way to the Romans, that’s where we first discover the use of trusts. And it was a testament Terry trust, meaning that it was to, uh, help protect the property and keep it, uh, in the family when a person died so that, you know, it didn’t get a squandered or or sold or anything like that. Uh, next, um, you see the trust really start to evolve and come to fruition during the Crusades. You know, you had all these, um, wealthy individuals who are going on the Crusades looking for the holy grail or whatever else there are looking for in Jerusalem in the Middle East. And they would leave their property in trust. They would leave somebody else in charge of it to manage it for their benefit. And so when they returned, uh, it would still be there and then they could reclaim it and usually they would have to get a court order to get it back from the person.
Um, soon after that, uh, came corporations, uh, starting with the east India Trading Company and, uh, that was used to protect the individuals, um, in their investments. Uh, you know, when they’d go to expand, uh, and financing the trade, um, all the trade throughout the world and also the colonization of the Americas, of the Caribbean, of uh, India and Asia, all those things. Basically they wanted to put a limit on the liability they’d be exposed to, especially for the, you know, sending people to the colony so that if the ship went down, the families can sue the individuals who financed it, um, for anything more than what was in that corporation. Okay. So then we have a nice long period between, uh, in, as far as development of asset protection. And it’s not really until the late 1970s, uh, that we see another big change.
And that is in Wyoming. Uh, they were the first state to create the LLC, the limited liability company. Basically what the limited liability company did is it took asset protection, um, of the corporation, but also put it into the flexibility of a partnership, uh, as far as taxes goes. Because the LLC could be taxed a flow through to the individual instead of being taxed twice like the corporation was. And then the last big change we have in a state or an asset protection trusts a came first with offshore trusts. You know, so you started with the, the Cook Islands and the new Grand Cayman’s and different countries like that who offered you, you could set up a trust in their country, keep the assets there and basically, you know, they would never release them to the u s if, if they’ve person ever got sued, uh, will the states wanted to keep it somewhat here.
And so they started creating what’s called domestic asset protection trusts are sometimes referred to as a self settled spendthrift trust. Uh, Alaska was the first one to do this basically saying you can set up a trust for yourself, uh, within the states that, uh, protects against creditors. Um, since then there’s um, you know, maybe a dozen or so states that offer these, um, asset protection trust are these, uh, self settled spend through of trust. Nevada is one of those, um, and considered to be the best for that because it has the shortest waiting period. And what I mean by that is it only takes two years. If you transfer the assets and you don’t get sued for two years, then those assets are fully protected from creditors going forward. So one of the Trust Attorney Las Vegas things is, as I’ve gone through this history, is all of those aspects that I talked about are still part of a valid asset protection plan.
Today. We can still use all of those aspects. We can still use a regular, a testamentary trust, a living trust. Uh, we can use a corporation, we can use an LLC and we can use an asset protection trust and it kind of, they build off of each other. Um, depending on where you’re at w asset wise and also what you’re trying to accomplish. So, um, let’s take some time and talk about, um, you know, kind of the basics and build from there as far as what’s, what steps you need to take to do an estate plan. The very basic thing you can do, um, or sorry, asset protection plan. The very first thing that you can do is, uh, to protect yourself as something called a homestead. So this is if you own a house and you want to make it so that you won’t lose your house if you get sued by putting a homestead on it, at least here in Nevada.
And that means that the person who sues you, they cannot foreclose on your house. The idea being is that we want to protect people, not forced them out on the street, um, just because they got sued. And so the homestead protects that. And so the person still has the lien against the house. They still will get paid when that house is sold. So if you decide you want to move and you sell the house, that person’s going to get paid out of the proceeds of that. Um, but it doesn’t force you to have to sell the house and be foreclosed upon and going go destitute. And anybody can do that on their property, uh, at, at any time. So the only issue is if you ever change titles, so let’s say you have to refinance and it’s only loans only going in your name. So title makes you put it in your name instead of you and your spouse.
Well, because you made that change too from you and your spouse to you, you would have to re homestead at every time there’s a deed transfer. Now the next part of asset protection is the living or revokable trust. Now you’re saying like you’ve, you’ve told us before that that doesn’t provide asset protection. Uh, well in some cases, um, in most, yeah, while you’re living, while you are, um, you know, the trust door and the trustee of that trust and it is a revocable trust for you. It does not provide asset protection. That is true. But the thing about living trust as it does avoid probate. So there is some protection there. You know, you don’t have to go through court, doesn’t have to be public record as far as, you know, letting the creditors know that you died and what assets you have. Um, but it also, once you pass away the beneficiaries that you left it too, it’s protected for their benefit if it’s left in trust.
So let’s say you have minor kids, it’s left to them. And before it ever gets distributed to them. Um, you know, let’s say you got 18 year old kid, he goes out and gets in a car wreck and get sued because it’s his fault. Well, guess what, that trust money because you left it to them is not theirs. It’s not, he hasn’t received any distributions. He doesn’t have a right to receive any distributions. And so that money would not be subject to that lawsuit. So that’s where it can provide that asset protection. Um, so it’s not while you’re living for you, it does not provide protection, but it can for your beneficiaries. And before we do any sort of asset protection planning, we want to make sure we have the basic estate plan in place with the living trust to avoid probate. That’s the first building block now that we want to work with.
Now the next one we can talk about is a corporation or an LLC. Um, you know, any, any variation of those s Corp, a c Corp, they provide that protection between the business entity and the business activities versus, uh, you know, you individually. So one of the things I see a lot is people start a business and they’re just doing it out of their house on the side. And so they’re building it. They’re not ham. It file a formal entity. We call that being a sole proprietor. And if that’s what you’re doing, um, that’s great. Helps you get a business off the ground. Low, low expense. I used to have to have get a state business license. You don’t have a ton of expenses there, but as you grow and one of the things you need to be aware of is, you know, you need to incorporate as a corporation or file articles of organization does form an LLC.
And what that can do is protect your individual from the company assets. So, uh, take the scenario of, you know, let’s say a handyman, he’s going around and um, you know, fixing people’s, uh, things in people’s houses. There’s some risk there, right? He could break your pipe. He could, um, you know, cause damage to the house. He could slip and fall or have an employee slip and fall and get hurt on the job. Um, so what does that look like for you? Well, if you’re the owner of that company and you have it just as a sole proprietorship, then you can be personally liable. That means they can come after your personal residence. They can come after your personal bank accounts versus if it’s in an LLC or a corporation, the corporation puts that kind of stop and shield on it so they can only get what the business assets are, which is, you know, maybe the equipment in there and the company bank account.
But anything that you’ve taken out, um, you under the normal course of business each year, you know, the profits and stuff that goes to your, uh, personal residence towards your, your personal bank account or retirement accounts and that stuff that would not be subject to it as long as you’re treating it like an actual business, meaning that you don’t pay for your kids’ college out of the business account. So, um, you know, very good to kind of put that stuff in there. One of the things I hear a lot is, you know, Blake, you know, I have, I have rental properties and I have an umbrella policy. Why do I need to form an LLC? Well, I’m an umbrella policy is good. Uh, definitely I think that that should be something you have in place. It’s there to, um, to help cover any unexpected, um, you know, claims that aren’t covered under your normal insurance.
Uh, but the thing is, you know, insurance companies are in the business and making money, right? They’re going to want to fight and not pay back, pay out as much as possible. Another thing is they’re going to have limits on what is going to pay out versus where if you put the property into an LLC or a corporation, preferably it and all scene. And that’s the whole tax discussion and we don’t have time for today. Um, then if, if somebody gets hurt on that property and they sue you, they, let’s say, you know, really catastrophic thing, you are super negligent. Didn’t, didn’t do what you were supposed to do as far as maintaining the property. Um, and so the business gets sued, or if you get sued individually, they can come after any of your personal assets. But if the business is the one running it and you, you treat it like a business and they get sued, the Max that they could come after is the value of that house because that’s the only thing in that LLC.
It kind of puts a cap on them as far as what they can go after. You’d still have the umbrella policy and hopefully that would cover all of it and you wouldn’t lose the house. But let’s say it’s, you know, a case of $1 million and you only had insurance for 300 pay. Well, instead of having to cover that extra 700 out of your personal assets, it puts a cap and says, Yep, you know, you can, yeah, you have a case more than that, but you can only get what we have. And we only have a house that’s worth $300,000. And so there’s nothing else that they can do at that point. Excuse me. And now the last piece of the asset protection puzzle, uh, is that Nevada, a domestic asset protection trust or the self settled spendthrift trust, as I mentioned before in Nevada, has the lowest threshold as far as a timeline.
So you can put your assets in this trust. If you don’t get sued for two years, those assets are untouchable and future lawsuits. Pretty great thing. Now there obviously it has to be some caveats there. You can’t just put everything in there. Um, you can’t absolve yourself of all liability. So we tend to tell our clients, err on the side of, you know, let’s stick around that 50% are under, um, you know, so there’s other assets, um, outside of that that we can, can say, or it could be subject to the lawsuit, um, and you’re not completely absolved it so they don’t destroy the l or the asset protection trust when you go to court. Um, and then the other caveat is you have to have a Nevada resident as a co trustee with you. This person cannot be a spouse, but it can be a child as long as Aaron, no matter resin, it could be a friend.
It doesn’t have to be an uninterested third party. So, uh, pretty, pretty great stuff. That’s only in the last few years that they’ve made that change. It used to be, um, in all of these asset protection trusts, states that you would have to have a, um, you know, a bank or a trust company, be that trustee to kind of oversee it and make sure things were done right and they’ve since changed it to be a can be an individual is so long as they are a resident of this state, um, or the state that you’re trying to get that asset protection for. So, um, pretty great. You know, you just have to get a CO trustee to sign off on stuff. If you don’t like what they’re doing, you can always remove them of trust as trustee and put somebody else in place that wants to do what you want, want them to do.
Uh, so those are the four main things. Homesteading is the easiest thing. You can do it right now. Just go down to the county recorder’s and say you want a homestead, they’ll give you a form, you fill it out and pay the filing fee and it’s done. The next is you want to have a living trust in place, um, to avoid probate. And then when you die is asset protection for the see the assets that go to the kids or whoever you leave your money to. The third is, you know, companies and LLCs. Um, you know, if you have any legitimate business Trust Attorney Las Vegas interests, uh, or operations, highly, highly recommend that you talk to an attorney and your CPA so you get the best tax advice and in liability, uh, advice for how to structure that. And then the last thing is that asset protection trust.
And we can use some of these, we can use all of these. It all just depends on your situation. So you want somebody who’s versed in all of these aspects who can advise you on it and how they all work together. And, um, through a full estate plan, you can, we can protect a lot of your assets and make sure everything that you’ve worked so hard for. I was not going to be subject to a lawsuit just because somebody decides that they’re on a vendetta, um, and if he wants to go for the throat. So that’s asset protection in a nutshell. We went over a brief history as well. Hopefully you found that interesting. And, uh, thank you for listening and we’ll talk to you next time.