How to Set Up an Asset Protection Trust

Mark Pierce 0:00 One of the biggest single risks you have to any family business is divorce. The second biggest risk are drugs. The law will reward you if you plan. They won't reward you if you're reacting. I did an asset protection trust for a family. And he calls up one day and he says, You know, I need to get a distribution out to this person. I said, Well, that person is not a beneficiary of the trust. What's the reason of the distribution going to that person? Well, it's my mistress. And I can't let my wife find out about it. So if you make the distribution to me and I write a check out of it, she's gonna find out. So I need you to make the distribution directly. And I said, you know what? I'm not even gonna get into the efficacy of that one under the ambit of the trust document. I don't want to get involved in your domestic relations and disputes.

Maggie Pierce 0:40 This is Keep What You've Built. Every week I sit down with my dad, attorney Mark Pierce, and we break down the asset protection strategies nobody talks about publicly. If you're a business owner who wants to keep and grow what you've built, we are recording this episode for you. Today we are going to be talking about what setting up a trust looks like from start to finish. So I think the best place to jump in is who should be looking into an asset protection trust and at what point does it make sense to set up an asset protection trust?

Mark Pierce 1:13 Yeah, number one, any high-risk profession, anyone in a high-risk profession. Doctors, lawyers, gosh, I think anything's high risk these days, the way the litigation's going, right? Dennis? Somebody involved in the real estate business. I would I would suggest anybody involved in the real estate business might want to be in there, the lending business, anything like that.

Maggie Pierce 1:36 I'd also suggest an entrepreneur too, right?

Mark Pierce 1:39 Yeah, any sort of entrepreneur involved in a business that's, you know, a startup business, and you don't want to throw everything that you've got into that business because if the business fails, you want to be able to start another business and get on with your life. So anybody facing significant risk in the near term should definitely be in these. And, you know, let's be honest with you, it's legacy planning. So once you get involved in an asset protection trust, it protects the assets from outside creditors and from failures within your own family. So there's a top-down, bottom-up, and side-to-side liability as well that you need to take into account. And I think what people forget to get to rationalize is that, you know, here in the United States, one of the biggest single risks you have to any family business is divorce. The second biggest risk are drugs. If you haven't anticipated that and built it into your plan, you're not doing a very good job for yourself.

Maggie Pierce 2:32 That makes sense. It makes sense with the risk as well. Is there a certain amount of net worth or income generation where you recommend people start thinking about this?

Mark Pierce 2:43 Yeah, I would say, you know, particularly with doctor's offices, with the management service organization and how they run their office, they can get some pretty significant tax benefits out of an MSO. Set up an LLC, set up an MSO, devolve the assets of the business away from the professional side of the business, because the fresh professional side of the business has the potential for liability, the MSO would not. That would be a good one. So, you know, anybody who's involved in that, get going with an MSO right away. We provide those for you if you want one of those. But I would say, you know, when you get into entrepreneurship, they I've never got I've never started out with a bad deal, but I've certainly ended up in some. So to know that your house and your finances and your wife and your kids are protected from this business going under, it gives you a great deal more latitude in life than if everything's at risk all the time. And people will say, well, you know, at the end of the day, shouldn't you be responsible for your debts? Yes. The debts that you agree to be responsible for, those consensual debts, you should be liable for those. But guess what? If you're in an LLC in an operating business and you have trade relations, those people are relying on the efficacy of that trade of that LLC. And you're involved and you give your heart and soul to it. And if it doesn't work out, you lose everything in that LLC. And they will probably lose some money too. But it doesn't mean you have to keep answering for it. So if you want to go beyond the collectibility as a creditor within that LLC, get a personal guarantee from that owner. It's easy enough. You know how to do it. Go talk to your attorney. But if the owner says no, what are you going to do?

Maggie Pierce 4:23 All right. At what point should people think about getting a trust in terms of how much money they're earning?

Mark Pierce 4:29 You know, I would say the real litmus test is do you have outside of your home and your pension fund, do you have $500,000 that you are investing from time to time in various things? Businesses, uh, in particular LLCs, apartment buildings, those sorts of things, you should be in a trust. And you start getting involved in more than one apartment building or one more than one rental or more than one business, or you get involved in a high-risk business, you don't want those to come back on you. You want them, you want to keep that liability within those LLCs. So that's, you know, those are the people, the dynamic people who are acquiring businesses, acquiring assets, acquiring buildings, acquiring those sorts of things, those assets, and they involve development and they involve management, and they devolve, you know, involve cars, for God's sakes. You know, they should all be separate and apart from the liability idea. And I was advising some guy the other day who's got a plumbing business. He's got a lot of trucks. Nothing good ever happens from a truck. You know, it breaks down, you've got to go buy and sell them. They crash into people at the most inopportune times and they kill people in crosswalks. So at the end of the day, you want to isolate those liabilities away from your operating businesses and away from yourself. Now you insure them. That insurance provides what's necessary to run those trucks. The law requires you to maintain a certain amount of insurance. The law does not require you to maintain more than that amount of assurance. So do it, provided that's what their pool is. If they want to come outside that pool, there's no way that they can do it with a trust or an LLC structure that's appropriate.

Maggie Pierce 6:06 All right. So let's say somebody is listening to this and that describes them perfectly and they're ready to move forward with a consultation. What will that consultation look like? And what sort of questions do you ask? And what do you normally go over with them? What can they expect?

Mark Pierce 6:25 Right. When you initially book a consultation, we'll set you a short questionnaire. The questionnaire says, you know, who are you? Where are you? Who are your children? What sort of businesses do you have? What sort of assets should you have? I look at them. You know, that way when I get involved in the conversation with the individual potential client, I can speak intelligently as to what it is that they that they should look for, obtaining in a trust, and to see whether or not they need the trust. And I've had a number of people, particularly in the cryptocurrency world, I said, you don't need a trust yet. You know, that's an unnecessary expense. Go develop your businesses, go develop your platforms, come back when you're a little bit further down the road. It doesn't, it doesn't behoove you to have this at this point in time. So, you know, those are the people that I look for, are the people that have that. So they come in and they do an initial consultation. We talk about, you know, what are your goals? What are your aspirations? At the end of the day, where do you want to be in 20 years or 30 years? What do you want for your kids? What do you want for your family? How do these businesses fit into this? How do we segue into providing for the investment a passive income at some point in time? I did a wonderful seminar yesterday with a group of individuals over at an accounting firm, recovering accountants from Phoenix, Arizona. I forget the exact name.

Maggie Pierce 7:38 You remember the name of the Infinite Wealth?

Mark Pierce 7:40 Infinite Wealth. The guys at Infinite Wealth, you know, they'll give you ways in which to think about money and to come up with additional monies. And then there was another guy, Chris Perez, on there, who had a way to give really great passive income on excess capital that you might have. That was also part of a wealth seminar that we did yesterday. Really a bright guy. And so this gives you an opportunity to flush those things out and to begin to invest in that manner, run your businesses, take your passive investments and put them over here and run those as well under the umbrella of that asset protection trust. So the asset protection trust protects you from those liabilities of those businesses, but more importantly, it protects your family from themselves as well. Those creditors of those individual beneficiaries can't get into those companies. Divorces don't affect it because you do not have a personal property interest in that trust. So at the end of the day, you're protected from divorces, you can you can deal with drug issues, you can deal with high liability businesses, you can move money around, you can provide alternatives of investment for your passive investments, on and on. So it's about asset protection, but it's it's even more about organization and where you want to go as a family.

Maggie Pierce 8:53 That definitely makes sense. So after that initial consultation, what happens next and what does the drafting process look like?

Mark Pierce 9:03 Right. So we send you over to the client portal. Maggie opens a client portal for you, execute a contract, you make a down payment. And then based on that, I begin grabbing the information that I got from the original questionnaire that you sent in, plus the modifications that I made as we went through our conversation. And then I'll have additional questions. So we'll have probably one or two meetings after that. And then I put the documents together. Once the documents are put together, then we put them into the client portal. You sign them electronically, you have an electronic notary, and then that's your client portal with all your documents in it. You have access to it. If you've got an account, your accountant will have access to it. I have access to it, and no one else has access to it.

Maggie Pierce 9:46 And it's a very easy process because everything is done online and stored online. So I think you've said this before that we can pretty much move as quickly as the client will move.

Mark Pierce 9:58 Yes. You know, it's interesting. I used to spend when I first started out in this business, we had independent word processors and we'd have to do everything on a microphone, and then we'd have to get sheets, and we'd have to go through and correct the sheets, and we do all this stuff. And yeah, you don't do that anymore. You know, so the documents are reformulated. Every year we go through a complete review on every one of the documents that we have to make sure that it's kept up with the tax laws, the individual laws of the state where the trust is domiciled, keeps up with the families, things that are evolving within the families, et cetera, et cetera. And then those sorts of things are what you're going to be involved in. Now it's a template, so when I look at your questionnaire and after our conversations, I will adjust the individual aspects of that trust plan to fit you. But it's all electronic. So at the end of the day, it populates itself almost automatically. So when I've got all the information ready to go, it takes less than three minutes to input it and make sure it works. We then go through and we make sure that each one of the documents correlates correctly and that the changes went through correctly. And then we upload them. Then you get on there and you sign the documents electronically. A notary shows up and notarizes your signatures where they're needed to be notarized, and uh you can go from there. You've got a complete closing package at that point. And then we start going on to additional discussions down the road.

Maggie Pierce 11:24 Yes, so that was going to be the next step of this conversation was talking about what the maintenance of the trust looks like. In our last episode, we talked a little bit, or a lot of bit, I guess, about the proper maintenance of these structures and what's required to make sure that if God forbid anything happens, you end up in court, that the trust holds up, your business structures hold up. So what does what does being on the maintenance contract look like?

Mark Pierce 11:53 Yeah, the maintenance contract allows you a certain number of hours of conversation every year with an attorney to give you advice on the administration of your trust. And uh if you're not looking out and you're not trying to get that advice, you're really on a fool's air, right? Because things change and assumptions that you make may or may not be correct. So to get on for a half-hour conversation with an attorney who knows what they're talking about is worth its weight in gold because we're available to you, right? It's not like you got to call, make an appointment, take a bath, get in a suit, come in, sit in a wood-paneled waiting room, you know, and then marvel at the view of the city. And that takes, you know, three hours to get to that point, and then maybe have a five-minute conversation. No, we just get on the internet and we hook up like we're doing here and we get it taken care of for you. So you maintain it, you maintain the filings of your LLCs and your private family trust company with the Secretary of State. You make sure your investments are done correctly, and uh, at the end of the day, it provides a fool poof way so that if anybody ever comes in after the fact says you haven't been complying with the law, yes, you have, and it's electronic. And it's date stamped, and you can't controvert the date stamp.

Maggie Pierce 13:02 There you go. I also want to be explicit about how the distributions work for people because I know sometimes people get hung up on that. Part of the irrevocable trust is that you don't control the assets independently anymore, and that's what gives you the protection. But I think some people that scares them a little bit. So can you speak to that and how that process works?

Mark Pierce 13:27 Yes. Now, this is the first thing that you have to remember. You do not lose control of the assets in that company. You are on the investment committee and you manage all the investments on that trust. Whether you invest in something, whether you liquidate an investment, whether you transfer investments out, all of that is completely up to you and at your discretion. So you get in, you're the head of the investment committee. Next thing is that the trustee of the trust is called a private family trust company in Wyoming. It's formed as an LLC. We file a waiver of notice with the banking commission. That means that you registered with the banking commission, but you're not regulated by them. And then we filed an amendment with the Wyoming Secretary of State to make sure that you can function as a private family trust company in Wyoming. Now, we make you the manager of that trust company. So at the end of the day, you the only thing that you don't control are distributions out of the trust. Our law firm acts as the discretionary distribution committee. So if you want to request a distribution, you put a request in, we consider it, we okay it, and then you write the check. We don't write the check, but you can't write the check until we make the request for a distribution. And I would say, out of the last 10 years, there have not been very many times that I've not affirmed a request for a distribution. And I can give you a specific example if you want to hear it.

Maggie Pierce 14:49 I think I'm pretty sure I know the one you're going to give. Yeah. Go ahead.

Mark Pierce 14:54 I had done, I did an asset protection trust for a family. And he calls up one day and he says, you know, I need to get a distribution out to this person. I said, Well, that person is not a beneficiary of the trust. What's the reason of the distribution going to that person? Well, it's my mistress, and I can't let my wife find out about it. So if you make the distribution to me and I write a check out of it, she's going to find out. So I need you to make the distribution directly. And I said, You know what? I'm not even going to get into the efficacy of that under the ambit of the trust document. I don't want to get involved in your domestic relations and disputes. And he was very upset, and he fired us. I don't know who he hired that would go ahead and get involved in that mess, but that was something that I wasn't going to be involved in.

Maggie Pierce 15:39 So yeah, that's a that's pretty funny.

Mark Pierce 15:42 Yeah. You know, so we control the discretionary distributions. But it's anything involving health, education, welfare, and support. You want a vacation, want to pay for a kid's tuition, want to buy a new car for somebody, all that stuff's covered. You know, you can do that quickly and easily. And let's be honest, given the umbrella of where you are, management fees coming under those underlying LLCs will probably take more care of most of your day-to-day operating expenses as an individual, anyway. So we structure the compensation that way. And then that way the trust just becomes a piggy bank. If you need it for something, like, you know, once every five years or once every year, or whatever it is, it's there for you. But it's a piggy bank. You shouldn't be taking money out. Not very often, anyway.

Maggie Pierce 16:23 There you go. I also wanted to emphasize that when they're a member of the investment committee and they're making those decisions about the money in the trust, they don't need to consult the discretionary distribution committee, but they do need to keep adequate records on what they're doing. Is that correct?

Mark Pierce 16:44 Yes. Now, you know, let's say that the trust has some money in a bank account that's in the name of the trust, and the investment committee wants to form a holding company and then a couple of LS underneath of it to purchase some additional apartment buildings. You don't need to come to the discretionary distribution committee because that's not a distribution. That's just an investment that's being made. So the investment committee has full power, power, and authority over that.

Maggie Pierce 17:10 In instances like that, our platform makes it really easy to keep those meeting minutes. So you can go into the portal, input the information on what decision you're making and why, and it will generate perfect meeting minutes for you that are then stored in the portal. So if you ever need those going forward, it's not doesn't need to be approved by the attorney. It's an immediate thing, but it's just a nice to have so that it's not a huge administrative burden. It makes it a bit easier.

Mark Pierce 17:36 Um, too, right? Oh, of course, yes, date stamped.

Maggie Pierce 17:42 You can sign it in the portal, so it generates the meeting minutes and then it allows whoever's generating the meeting minutes or whoever's responsible in the portal for in the IC to sign it. And then there you go. Super simple. There you go. Uh okay, so uh maybe we should have spoken about this a bit before the maintenance package, but I want to talk a little bit about funding the trust and how that works. That would be right after the trust is set up and probably before the maintenance. But what do you advise people do when it comes to funding the trust? I know it really depends on what types of assets they have and things like that, but if you could maybe go over the most common assets that people put into the trust, how to get those in there?

Mark Pierce 18:26 Funding isn't covered by our contract because everyone's funding is different. Now, if you've got simple transfers of LLCs into the trust and you you're forming LLCs and doing that, we'll take care of that for you. That is not a big deal. However, if you've got something more substantial that you want to put into the trust, like you want to make an MSO or you want to buy so you want to transfer some land contracts and stuff like that. We are we'll help you with that, but most of that has to be done by local council. We can't draft deeds because it's just impossible to draft deeds unless you're an attorney from the state that you're in. So we'll refer you out to, or you should probably have an attorney within those places to make sure those deeds are done and that the appropriate names are on them. If you want to open bank accounts, we can help you with that as well. If you want to transfer, if you want to open an investment account in there, like with Charles Schwab or one of the major brokerage firms, we can establish a separate LLC for that. We charge for the LLC because it costs us money to do it, but we usually just do a cost flow through. So we charge you for that, and then you should be in good shape. So, you know, the funding is generally not so complex that it doesn't involve sitting down for a half an hour or so and getting it detailed out as to what you need to do.

Maggie Pierce 19:39 Great. Is there anything else about the process of setting up and maintaining the trust that you think we haven't covered that is important?

Mark Pierce 19:50 I do, you know, when I send you a letter and you take a week to get back, I gotta tell you, doesn't it makes me feel as though I'm not very important. And you know, I got things that I gotta go do too, because we have over 500 clients. So if I send something out to you, respond. And, you know, let's get it addressed. Stay on top of your business. You know, I'm a valued member of your management team, treat me like that. And most people do.

Maggie Pierce 20:16 That's that's good. That's a good point. Um, and then just as a final piece to leave people with, I know from what you've said, a lot of people end up procrastinating doing this type of planning. What are the most common reasons that people procrastinate this type of planning? Do you think?

Mark Pierce 20:35 Well, I'm just so crazy busy, you know, I just can't get to it. And, you know, I I always look up and say, you know, so after you s after you're sued and you're worried about where your assets are and what you can do, it's gonna get easier for you. You know, at that point in time, you know, the law will reward you if you plan. They won't reward you if you're reacting. And a lot of times people come in and say, you know, I've just been sued. I got, I've got this property over here, this is in my name. I need to get out of my name. And I look at him and say, fraudulent transfer. I can't get involved in that. If you had done it and put it into an LLC to advance of this thing happening, you'd be good to go. And here in Wyoming, you they have a two and four-year statute of limitations in most states regarding fraudulent transfers. In Wyoming, it's four months if you proceed under a certain statute. So, you know, if you anticipate something's going on, but it hasn't happened yet, run in. Let's get the trust done, let's get the assets transferred, and let's move quickly.

Maggie Pierce 21:35 There you go. I think also you've said that people sometimes procrastinate too because of fear of the unknown. And kind of what you just said, they're so busy and they think that this is going to be a huge process that's going to take a really long time when in reality it's only a matter of a couple of weeks. And how many hours do you think it typically takes people?

Mark Pierce 21:57 I think people are going to put about four to six hours into it, maybe less. You know, let me do the work for you. I I know how to do this, and I know what you need and where to go. And then once you get it implemented, let's do follow-up conversations to make sure that you're working it right and you've got things right.

Maggie Pierce 22:13 Okay, so then uh if people would like to book a consultation with you, where can they find you?

Mark Pierce 22:20 Uh it's Wyoming TrustAttorney.com. And uh, I don't know, you're gonna put a banner at the bottom of this thing where they can the link.

Maggie Pierce 22:27 Yeah, the link will be in the show notes. I was trying to let you do the outro, but yes, the link will be in the description of this video if you're on YouTube or in the show notes if you are listening on Spotify or another streaming service. So there you go. Any any last words before we sign off?

Mark Pierce 22:47 No, I think I'm good. Thank you.

Maggie Pierce 22:50 Thank you. And we hope to see you guys next time. Thank you for listening to Keep What You've Built. If you're interested in speaking with Mark, you can schedule a meeting with him through the link in the show notes or by visiting WyomingTrustAttorney.com. If you've enjoyed the show, please rate it five stars or give us a like. We'll see you next time.