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Design Your Asset Protection Plan

You design a lot of things in your life. The layout of your house, the flow of your business, the requirements on your children, and many more scenarios are all elements of conscious design.

Asset protection is no different. There is an architecture, a cohesive structure, to your properly planned legal safeguards. Sometimes you try and do it yourself, which could be fine. Many people are into DIY. And yet, with all the asset protection misinformation on the internet, you’ve got to be careful. Does that overpriced ‘guru’ really know what they’re doing? You won’t know until the plan they’ve designed holds. Or fails.

Designing your asset protection plan does not improve with setting up more entities than you need. When your plan is solid with three LLCs, who benefits by adding 5 more LLCs to the mix? I know you will answer that question correctly.

Your effective design should never be a matter of confusion to you. If you don’t understand what your asset protection planner is suggesting, demand a clear explanation. If they respond that most attorneys and no clients will ever understand their ‘brilliant’ structure, get up and walk out. That’s not how it works. As well, if you ask to get a second opinion from another lawyer about the plan and they claim that no lawyer will even begin to comprehend what they’ve put together for you, as a special client and part of the elite inner circle, it is also time to leave. You need to clearly understand the plan. And so does your spouse.

Sometimes, like an old bridge, a plan design has fault lines. The structure appears fine, until it collapses under pressure. This can be the case with land trusts. Promoters tout them for their asset protection benefits while they offer no such feature. To cover this inconvenient issue, they suggest that one or more land trusts be beneficially owned by one LLC. The structure appears as follows:

Land Trust Structure

How will this structure hold up?

When a tenant in the duplex is injured on the property, they have the ability to sue the land trust for their damages. Some promoters claim that the tenant will never know the owner of the land trust because such information is confidential. Without exaggeration, this is one of the greatest legal fallacies in history. If the tenant’s attorney can’t locate the land trust owner all they have to do is publish notice of the lawsuit in the paper. It is very easy to do. And if the owner doesn’t respond to the lawsuit the tenant can win by default. You’ve lost the case and they are foreclosing on the property. “Well,” says the land trust promoter as they close shop and move 1,000 miles away, “I guess that didn’t work.”

Contrary to what these promoters may suggest, you don’t want to hide. You actually want to be found if needed, so that you can receive the notice of a lawsuit. You want to promptly turn the claim over to your insurance company so they can defend you and hopefully settle the case. If you hand them the claim after a default is entered in virtually all cases they don’t have to cover you. You didn’t give them proper notice of the lawsuit. Your design flaw is not their problem.

There is another design flaw in the structure above. Let’s say the promoter acknowledges that an LLC needs to be in the mix for its benefits of limiting liability. So, the beneficial owner (a required feature of land trusts and akin to a shareholder in a corporation or a member in an LLC) is listed as XYZ, LLC. When Land Trust #1 is sued by the tenant the liability flows to the beneficial owner, or XYZ, LLC.

Now if XYZ, LLC were on title to the property instead of the land trust, the liability would be contained within that one LLC. But in our design flawed structure, the liability flows from the land trust into the LLC. What does the LLC own? Not only Land Trust #1 but also Land Trust #2 and Land Trust #3. So the tenant can also get what the LLC owns, which is equity in all three land trusts. “Well,” says the land trust  promoter as they prepare to move to Alaska, “that didn’t work either.”

As is clear, the design of your asset protection plan really does matter. When building it listen to your little voice, the one that is always there and always protective. If the proposed plan doesn’t make sense, if it doesn’t add up, think again. Get another opinion. Your asset protection is too important to be left to unquestioned amateurs.

Corporate Direct, on the other hand, does not advise using land trusts or any overly complicated structures. We have been in the business of asset protection for over 30 years and we can help you structure your entities correctly and in a straight forward and affordable manner. Get your free 15-minute consultation to get started today!

Asset Protection for Gold, Silver and Precious Metals

Gold, silver and other precious metals require asset protection.  We live in a litigious and uncertain society, which is most likely one of the reasons you invested in precious metals in the first place.  It is important to know that if gold, silver, platinum and other metals are held in your individual name, they too can be lost in a lawsuit.

LLC, a Gold Standard for Precious Metal Asset Protection

By using an LLC to hold title to your precious metals you have much greater protection.  With precious metal assets in an LLC, if you are sued individually a judgment creditor (the person who won the lawsuit) has to fight through the LLC to get at the assets.  This is a difficult process.

The Strength of Wyoming LLCs

By using a Wyoming LLC, all the judgment creditor can get (after hiring a Wyoming attorney to go to court in Wyoming) is a charging order.  The charging order is a court order directing the judgment creditor to receive any distributions made from the LLC. This means they can’t force you to sell the metals and give the money to them.  All it allows is for monies – when distributed – to go to the judgment creditor.  In the case of precious metals what distributions will be made?  You typically would not be distributing your gold, silver or platinum.  Instead, you are holding them in the LLC for protection.  You are free to hold them in the LLC until the judgment creditor goes away or settles for pennies on the dollar.  More importantly, by holding valuable precious metals in an LLC the claim may never be brought in the first place.  LLCs offer gold asset protection, silver asset protection and precious metals asset protection.

Privacy and LLCs

Another important feature of the LLC is privacy.  Wyoming law allows for nominee managers, whereby another person is listed as the manager, thus keeping your name off the public records.  (It is both incredible and disturbing what people can find out about you on the internet.)

Our nominee manager is a professional living outside the United States.  She won’t know about or have access to your precious metals.  That is between you and your gold and silver dealer.  But by using a nominee your name stays private, which is an excellent strategy these days.

Title to your gold and silver must be in the name of the LLC for you to have protection in place.  There are two ways to do this.  First, you can form the LLC and buy the precious metals in the name of the LLC.  (We have LLCs already formed for this purpose if you are in a hurry.)  By purchasing metals in the name of the LLC the chain of title is clear.  Or, if you already own the metals in your name or now buy them in your name, you can later transfer title to your LLC.  The preferred way to do this is a transfer agreement signed before a notary.

Wyoming and Nevada have the most protective LLC laws.  The difference is price in the form of annual fees.  Nevada is more than $300 per year versus less than $100 per year for Wyoming.  With our resident agent fee of $125 for either Nevada or Wyoming, total annual cost is nearly $500 for Nevada versus just under $200 per year for Wyoming.  

Qualifying to Do Business May Be Optional

But unlike other situations where protection is also required – rental real estate, for example – with precious metals, you don’t need to qualify to do business in the state where the assets are located.  With precious metals your LLC’s business is protecting assets not operating a business.  And a Wyoming (or Nevada if you want) LLC is all you need, no matter what state you are in.  That said, California can present challenges, so be sure and speak with an account representative about your specific situation.

Tax Considerations

Tax wise you won’t pay any extra taxes by using an LLC to hold gold and silver.  Since the LLC is a flow through tax vehicle, taxes on gains will be taxed to you personally, just as if you held it in your individual name. The difference is with an LLC you have asset protection.  By holding gold and silver in your individual name (or even in your living trust) you are exposed.

Misconceptions of IRAs

Many people are using IRAs to hold their gold and silver.  There is a misinterpretation that IRAs offer complete asset protection.  In actuality, it is much more complicated.  Federal law protects IRAs up to only $1 million but state laws can reduce that amount.  For example, in Nevada only $500,000 in IRA accounts is protected.

The better practice is to have your self directed IRA form an LLC to hold the gold and silver.   A graphic example is as follows:

Self Directed IRA
(owns LLC)

In this structure, if you were to be sued individually, a judgment creditor (or bankruptcy trustee) could seek your IRA assets.  If they can get past the IRA they still have to fight to get through the LLC.  You have much better protection using an LLC to hold your IRA assets.

All told, gold, silver and other precious metals deserve asset protection.  At just under $200 per year to maintain a Wyoming LLC, you are buying the best asset protection insurance possible.

For more information, schedule a consultation today!