Hey guys, Toby Mathis here. And today I'm joined by
attorney Josh Robertson, and we're going to be going over, Josh, what are we going to be going over? Give me the thumbnail sketch. - Yeah, so today, we're going
to talk about three things. We're going to talk about
three different ways to keep your name off of things or keep your assets anonymous or your ownership of the assets anonymous so creditors can't find you. - Yeah, and I'll just say
from doing this for 26 years, 27 years, whatever it's been, one of the most effective
tools, but not the only tool, is making sure that people
can't see what you have so that you don't inadvertently
make yourself a target. 'Cause one of the beautiful
parts about being wealthy and then people knowing it is that they like to
try to take your stuff. And so if we can at least
keep them from not knowing what stuff you have or even
whether you're wealthy, that's half the battle. The other half, of course, is actually having a plan that works. But we'll go over that, right? So Josh, three things we're going over, jump into number one. - Sure. The first thing, and
it goes back to exactly what Toby just mentioned, is you want to control all
of the stuff that you have and own none of it. Now, what does that mean? That means that you want to own the thing that owns the thing. So what we do with asset
protection structures and in order to anonymize
your ownership and control of the asset is we
create business entities, usually LLCs, not always. But you own the business entity. And then the business
entity owns the asset. Could be any type of asset. Could be real estate, could be equipment, could be intellectual
property, could be anything. Just a whole bunch of cash, whatever. Now, the way that you anonymize
your ownership of this is by understanding how
you can own the asset but not look like you own it. And that goes back to
how you file the LLC. You don't want to file your own LLC because then your name is
listed in the state database as the organizer, the
person that set up the LLC. You don't want to list yourself
as the registered agent, because then, even inadvertently, you've put yourself out there as saying, "Hey, this is who I am. This is where I am." Because registered agents
have to have addresses. "And this is when I'm going to be there." Because registered agents
have to be available during business hours. And you don't want any of that. So instead what you do, you hire a company like
Anderson to set up your entity, work as your registered agent, and list you as the manager of the LLC. What's the difference
between a member of an LLC and a manager of an LLC? It's very simple. A member of an LLC is an owner of the LLC, while the manger could be anybody, could be me, could be
Toby, could be, you know, Tom, Dick, or Harry off the street. Manager doesn't equal owner. Member does. And understanding that
difference already puts you leaps and bounds ahead of creditors that are trying to
figure out what you have to hold you liable. - Yeah, and I think you just, it was very well put, but
number one is making sure that the asset that
somebody might want to take isn't just sitting there
in your individual name so that all they have to do is attack you. You want to make sure that
you have control of something, but that it's in a nice vehicle or vessel that protects it, and more
importantly, protects you from it and it from you. Like a lot of folks miss
that second part, where hey, if I'm driving down the car
and I have a car accident, the last thing I want is to put all my other assets in jeopardy. There's ways to prevent that. And make sure that you're not the one who's got your name all over it. Having a third party, like a lawyer, that's what the wealthy do. The poor, unfortunately, love
to go out and set things up and make it really easy
for them to be tracked. All right, so that's really well put. What's number two? - Sure, so number two is just
using the various strategies that you have available to you in a creative way to
enhance the anonymity, enhance the protection. Remember, what we're looking at here is, if people don't know what you have, they can't attack it, right? They can't go out and find it and find you by looking for your assets. And so one thing that we
talk about frequently, you've likely heard Clint Coons, one of the other partners here
at Anderson, talk about it is using a land trust to
anonymize the ownership of real estate that you have. It does a lot of other things as well. How this works is, you buy a piece of real
estate and you transfer it into a land trust. And with that transfer into a land trust, your name as the owner
is off of the record. However, many times you
still have to be listed as a trustee of the trust. Well, how do we get rid of that? How does that play into this
whole idea of anonymity? - Mm hmm. - And the easiest thing
to do in the situation is to use what we just talked about, having a manager of an
LLC controlling the LLC, controlling the actions of the LLC, but not giving any hints
as to who owns the LLC. And so what we do is we use
these two strategies together. We create a land trust
that's going to own title to the property, and then we
appoint an LLC as the trustee of the land trust. You just have to have
a person under the law to serve as a trustee. Well, entities are considered
people under the law. They are separate legal formations that can make their own decisions, can have their own assets,
can contract for things, can get take debt, and
can manage other entities, like a land trust. So if you have someone
create an entity for you where you are the manager of that entity, then you create a land trust and have the entity as
the trustee or the manager of the land trust, and you
are the manager of the LLC, here again, we've implemented
the previous strategy just in a layered approach. Where you still control
all of those assets, but nobody can see that on
a publicly available record that you control that asset. So it's a variation on a theme,
but it's an important one, because it shows that, as
you start to understand the legal principles behind things or work with people that do, what you can do is put structures in place that, from an outside perspective, look very, very complicated,
but from an inside perspective, it all just lands with
you controlling everything in different ways. - And this is a good time
to put like the structure that you just laid out
there may not even have an extra tax return. For example, it could have
zero impact on you having to do anything from a tax standpoint. The very structure you
laid out there may cost, you know, a state filing
fee once a year on the LLC, the land trusts are nothing. But from an outside standpoint,
somebody looking at you, let's say it's a tenant,
you got, you know, let's say you have 10 rental properties, they can't see that you
own 10 rental properties. And therefore, if something bad happens, like one tenant gets mad at
you 'cause you tossed 'em out because they were dealing drugs, or because they were messing
up the apartment or your unit and there was mold in there, whatever, and they're thinking of,
"Hm, I want to go get even with that landlord." They don't go grab a lawyer who sees, "Oh, Josh owns 10 properties. Let's shake that tree. There's money that's
going to fall out of it." What they want to see is,
"Oh, there's really nothing to get here, move on, next." And that works really, really well. Some folks don't realize how
well that works, (laughing) but it's-
- Yeah. - Extraordinarily effective in
preventing frivolous lawsuits and just not having to be annoyed. Or if you do get sued, it gets settlements
done very, very quickly because there's no big
win at the end of the day that they can see. And we don't want to underestimate that. All right, Josh, what's number three? So you said there was three ways, and I'm really curious. You just hit two. What's the third way? - So the third way is
going to be important for all different types of asset classes, and it's splitting up ownership and use. So what do I mean here? Well, let's take a construction company. Let's take somebody who's
going out and developing land. They have earth movers. They have dump trucks. They have excavators. They have lots of very heavy machinery that's worth hundreds
of thousands of dollars, no hyperbole there, right? That's a very large target for somebody who has big machines that
can cause a lot of damage to a lot of people. That's a really big liability target. So having all of those
assets in one entity can cause a problem. In fact, I'm working
with a client right now who just settled a lawsuit because he had equipment that was used, and unfortunately, somebody was injured and he had to settle. Now, gratefully, he settled, because he had his business
structured in such a way with liability insurance
that could cover that. But because of his experience there, he's come to us and he says, "How do I structure this better? How do I do this better?" And it's very simple. All you do is, you break
out ownership and use of the property. So instead of having one
LLC where you have all of the construction equipment
and all of the operations and everything gets done in that one LLC, what you do is you have a separate LLC that's owned in a completely
different way over here, not with this LLC, that
owns the bulldozer. And you have a separate LLC
that owns the excavator. You have a separate LLC
that owns the dump truck. And you decide in consultation
with a professional how many LLCs you want, what pieces of equipment you want where, and you move the equipment
from the current LLC owner, if this is your situation, into the entity working
with other tax professionals and the like to move it in a way that's not going to, you know, get you absolutely decimated on taxes. But you move that equipment
over to other LLCs. And then you lease that equipment back to the use company. And that way, the
company can still use all of the equipment that it
needs to get the job done, but you're getting
money in to do the work. You're being hired to
do work, to move earth, dig holes, what have you, grade land. And then you pay that
money from this entity to another entity for
the use of the equipment. What does this do? Well, first, it gets those
large, very valuable assets out of the construction entity. So that construction entity doesn't look like a prime target
because it has hundreds of thousands of dollars worth
of equipment sitting around. That's just waiting for
someone to come after you. Second, you get cash that
would usually be sitting in that entity out of that entity. You still use it, you still control it, but it's not here waiting
for someone to come and get a judgment against you. Now, some real estate
folks might be saying, "That's all well and good, Josh, but how does this relate
to what I'm doing?" Well, it's the same thing, right? You have a property
management company, say, that you enter into a property
management agreement with between the LLC that owns the
property and that company. Same exact principle. The property manager stands out front, rents to tenants, gets the checks, remits payment from the
tenants to the owning LLC, same principle applies. And you see here that
with one little tweak, it's not a very difficult tweak, it doesn't have a lot of
tax implications usually, and those tax implications
are able to be planned around, you can protect a lot more of your assets. And just like this client
that I'm working with said, just having the discussion and knowing that there's a strategy that
we're working to implement helps him sleep better at night. And that's great. That's what we want. We want him to be able
to do what he's doing and not worry about
someone coming after him and taking everything away. - Yeah, and I think, I would reiterate a couple of things and maybe expand on it
slightly of what you just said, 'cause it is super effective. But where you're dealing
with third parties who you may have exposure to, you don't want that to
be sitting there holding a bunch of asset. And that asset, as Josh has
put out, could be equipment. It could be vehicles. It could be planes. It could be cash. And this is where it
gets really interesting. So for example, if I'm a landlord, you might be saying, "Oh, there's no way to escape that liability." Well, actually, there is. The liability of the lessor, like who's put that
property into the public and is dealing with a tenant, and that tenant is using that property, if there's a lien against it, in other words, I don't just give it cash, but instead I loan it cash, now the exposure is the equity, not the entire value of
that property anymore. Now, I would, you know, if
I have a third-party entity, maybe it's my safe asset
entity is what we call it, but it's loaning the money over to one of my other LLCs. And now all of a sudden, my
exposure's greatly diminished. If I am a construction company, just like Josh just eloquently put out, and I have $2 million worth of equipment and something happens in that, they're going to take my equipment. But if I have my equipment outside, then the party who is liable, like equipment doesn't drive itself, the liability is whoever's the operator. So if I have an operating entity and it does not own that equipment, there's not the exposure to the equipment. Now that equipment's always safe. And I don't know about you, but if I'm running a business
and it has substantial assets, I am worried about them taking the assets out of that business. I am, you know, I'm happy to take the hit on the business itself if I did something. That's what I carry insurance for. That's what I carry
umbrella insurance for. And if they want to destroy
my business, go for it, 'cause I still have the asset separate. I could still resurrect and
live to fight another day. But if I have them all in one basket, it's easy for them just
to take the whole basket. And that means I'm out of business and I've lost my livelihood. So this one little nuance, Josh, I think you really, I want
to put a fine point on this, and I don't want it to be underestimated, that little nuance there
of isolating the asset from the entity that has
that risk is so effective. And huge companies do it. Fortune 500 companies do it. You might remember
Geoffrey from Toys"R"Us. He lived to fight another day because they kept the intellectual
property separate, right? And you're seeing this over
and over again play itself out in Wall Street. And the same thing applies to Main Street. Is you can set yourself up to where, even if you have a hiccup, it doesn't put you under for the rest, you know, for the duration. You're still able to come
and continue to operate. 'Cause God knows, it's hard
enough to start a business. The last thing you need
to be worried about is, "Hey, what if somebody knocks me out?" Is there anything else
you want to hit on, Josh? 'Cause I think that those three
points are very well taken. - Yeah, I-
- And was set straight. - I just have one last thing, and that is, the
importance of understanding what anonymity is and what it isn't. So I think a lot of people sometimes get the false impression that anonymity equals asset protection. That's not the case. Anonymity equals a smokescreen, a legal smokescreen that you
can hide your assets behind so that you're not easily found. And that by itself stops a lot of lawsuits from coming and beginning
in the first place. But the legal structures
that undergird the anonymity are what we really want, and that's what's going
to protect your assets if a challenge does get
through that smokescreen or in the event of a
legitimate business challenge or legal challenge, excuse me. That's what you want is
the structure undergirding the asset protection. A lot of times, clients will say, "Well, I don't want my
anonymity to be jeopardized," when they're going to get a bank account. Well, it's important to understand, bank records aren't publicly available. And if they were, the banks would have a serious data violation problem that you could sue them over. They don't want that. And so you don't have to be
worried when you're going to set up a bank account about anonymity. That's not a publicly available record. However, when you're going to file a deed, buying a property, or
putting a lien on something, or doing any of that, that is publicly available information. And so that's when
anonymity becomes important. To set up that smokescreen to
stop lawsuits from occurring. That's what anonymity's about. And it's just important to have that base level understanding
so that you're not, you know, worried about talking to anyone about your business. You can still do that. It's just making sure that
you understand the principles. - Yeah, so again, the way I always look at it is, anonymity is preventative measure, but if you're in a battle,
you still need to have the legal structure. There's a lot of folks
out there, for example, in real estate who are
advocates of land trusts, but they don't marry them with an LLC. - Right.
- In other words, they rely completely on
the preventative measures, saying that's going to
solve all your issues, and it's like, no, you're
going to have issues. You're going to have situations
where somebody gets injured on a property or there's
liability, there's exposure. Whether it be for anything
that you didn't mean to do, but maybe you fell below
the standard of care from a legal standpoint
and you have exposure, you still need to have something there that's actually going to
protect you in the event that there is a legal fight. But boy, I cannot reiterate enough that just not letting somebody
know how much you have, in other words, how
much that they can take, that prevents a huge chunk of the frivolous lawsuits for sure. And in the case of a legitimate lawsuit, it still gives you settlement arguments to take it off the table. But at the end of the day, you have none of that if
you don't have some sort of asset protection plan. So if you end up in a lawsuit, you want to make sure
you have something there, and that comes with
what Josh just laid out. It's a creative use of entities. It's making sure that you
understand where risk is and isolating assets that have value so you're moving the
stuff that's of value away from the line of fire so that it's not part of that discussion. Josh, I think you did really
good job of laying it out. And I'm going to say
thank you for coming in, and thanks for hitting those
three really important parts about keeping yourself
out of the public record, how you can keep privacy. I think you nailed it, thanks, Sir. - Oh, thank you for having me.
