Take Some Money Off the Table! Protecting Wealth Before You Need To

Mark Pierce 0:00 The law distinguishes between planning and reacting. If you have an emergency and you have got to have an asset protection trust, it's too late. One of the ways that you take cash off the table is you make sure that creditors can't get to it in the event that you've got a real catastrophe going on and some of your business is a crater because creditors will always come after you.

Maggie Pierce 0:20 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 an entrepreneur who has built a business, but you want to know how to build a legacy, we are recording this episode for you. Hello, Mark. How are you doing today? I'm well, Maggie, thank you.

Mark Pierce 0:40 Just fine. How are you?

Maggie Pierce 0:42 I'm doing great. All right. Okay, so jumping right into it, you say the two biggest mistakes entrepreneurs make are not taking money off of the table and not protecting what they do take off. Can you start with the first one and explain what taking money off the table actually means in the context of entrepreneurs?

Mark Pierce 1:02 Right. I'll be really straightforward with you. Most people keep running on the table like it's gonna go on forever. And uh it doesn't. And you have ebbs and flows in the business cycle like you have ebbs and flows in your your personal life. You have some days everything's going great, the next day you're in a catastrophe. I've just within my lifetime have lived through five or six catastrophes. I think one of the worst catastrophes I lived through was a 2008 financial crash. And uh there was also another one in 1987 that were just huge, and the effect is catastrophic on people because no matter how good it seems as though it's going, it's never that good. Conversely, no matter how bad it's going, it's never as bad as you think it's going to be. You'll always come out of it. The question is, how do you come out of it? So the greatest opportunities you're going to have is when there's a huge downturn because people are desperate for money and you're going to make good deals. And any business deal that's made, that's a good business deal, is one that's made by buying right. And when you've got a catastrophe on your hands, you're going to find good deals, like Baron Rothschild said in the war of uh what was it, the Napoleonic Wars. He was in the streets of Antour, Belgium, outside of the uh the charge of Waterloo by Napoleon. He said, When there's blood in the streets, that's when you buy. And uh I can tell you that's the truth. So what you have to realize is that you're in the middle of a an upcycle and it's frothy and people are excited and everyone's making money and it can go on forever. That's the indication that you should sell out a little bit, take some profits and put those profits off to the side that you don't touch. Because if there's a crash, you can use those profits to pick up good deals coming by, and you'll get them for 10 to 20, 30 cents on the dollar. And that's what I mean by take a little money off of the table. Nothing's as good as it seems it is. Get ready for the next downturn and play it safe.

Maggie Pierce 3:02 Okay. Uh you mentioned that you've been through several catastrophes yourself. What did those look like for you? And what were they specifically?

Mark Pierce 3:11 Yeah, the first one was in 1988 and the stock market collapsed overnight. And uh it was one of the first real financial collapses that we had here in the United States in the stock market because it had been going up continuously for several years. And overnight it just collapsed. And people couldn't get a hold. This was in the years before they had electronic trading and that sort of thing. People couldn't get a hold of their brokers. They couldn't get on to sell their shares. If they got on to sell their shares, they weren't going to get much money for them anyway. And there was an interesting paper that was produced by the National Association of Securities dealers about the market break that basically said there's nothing you can do in a catastrophe. Everybody wants to sell, no one wants to buy. Where's that? Where's the market going to go at that point? So you had stocks that were at $100 that were selling at $30 and $40. Were they $100 stocks? No, obviously not. Were they $30 or $40? No, obviously not. And I was working in Denver, Colorado at the time, and there's an old wildcat engineer who was officing next to me. And his name was Whitey Bozeman. Whitey Bozeman came in after the catastrophe and sat down and said, Mark, I'm going to sit here and we're going to make a little bit of money. I said, Really? He says, Yeah. He says, we're going to buy some stocks. I said, man, this is a catastrophe. This marks a free fall. Absolutely no way am I buying now. And he said, just stay with me. He says, I know you don't have a lot of money. I was a young man at the time. He says, but here's what we're going to do. We're going to buy 100 shares of Trans America. Trans America was an insurance company that was subsequently bought by Warren Buffett. So we bought 100 shares of Trans America and we bought 100 shares of something else. And I ended up on those shares, tripling my money in a very short period of time. And if I had kept those shares, I'd have made a lot more than a triple. So that's an example of what happened in 1988 with Whitey Bozeman. The second example I've got was the 2008 financial crash that occurred at the end of the, what was his name? George Bush, at the end of the George Bush administration. They'd been calling a bubble on that for a long time, and everyone ignored it. The housing prices were sky high, the market was sky high. Everybody's making money head over fist. And the next day, they weren't. And there was an absolute collapse in the economy. And the Treasury Secretary at the time, and I could see his face, but I can't remember his name, called up Nancy Pelosi, who was the head of the house at that point in time. And he said, I need to talk to you about this collapse. And she said, Well, we can make an appointment for tomorrow. And he said, You don't understand. I'm within about a minute of getting to your office. This is a national emergency. And he was one of these guys, and I guess he's guys, I don't know why I can't remember his name. I think it was Scott's something. Anyway, he says, I'm on my way over, I'm right outside your office. He sat down, he said, here's what we have to do. And he got a hold of the Federal Reserve Chairman, they got a hold of all these people, and they started implementing strategies to get away from the catastrophe that they were under. Absolutely brilliant, brilliant reading. And I came to realize that he's one of those individuals who doesn't run away from a problem. He's one of those individuals who runs to a problem. And I really admired him for what he did because he put his finger in the dike before the dike collapsed. That was another example because I was in a business at the time in 2008, and that business never recovered from that downturn. Anyone of a host of a number of reasons, but about the time you had the downturn, you also had, oh I forget the name of the organization that came out, but they kept kept shutting the government down. Oh, the Tea Party. Yeah. Well, they threw my business overboard along with the T, right? You know, at the end of the day, they did a lot of damage by shutting the business or threatened to shut the business of the government down. And so the government would contract, the government would stop, and then it would try to restart. Well, you can't start and stop the government on a done. And as they got closer and closer to these breaks, you would see things shifting down. And then when you got to the breaks, they'd stop. And then after the break got back, you'd have a little bit of a pullback, and then they start in on the same thing and down it would go. So it goes down, up, down, up, down, up. You know, so you ended up down more than up. And anybody who just sat out that period of time, put their money on the sidelines, and waited it out very well. And those are two times during my life to them that that has happened. I think we may be well heading into that again with the Trump administration, with this never-ending war in Iran, that, you know, we're calling for regime change. Yeah, good luck with that. And you know, we're also going, so we're going to put, and then we're going to put tariffs into place. We're going to whip everybody into submission. The next thing you know, your grocery bills are through the roof, and you can't get a tank of gas for under five bucks. So those impacts on the economy, on again, off again, on again, off again, are the sort of things that create catastrophes. If it's a, I've been in the process of pulling back. Because if I'm wrong, I've got cash. If I'm right, I've got cash. There's one thing you can't supplant, that's cash. Because in a catastrophe, you can't sell anything and get cash because there's no buyers. That's what makes it so interesting for somebody with a little cash. You can make great money.

Maggie Pierce 8:28 The second biggest mistake that you've said entrepreneurs make is not protecting what they do take off the table. Can you walk through what that looks like and what protecting the I guess the cash that you have and or the investments that you make with that cash looks like?

Mark Pierce 8:46 Yes, of course. One of the ways that you take cash off the table is you make sure that creditors can't get to it in the event that you've got a real catastrophe going on in some of your businesses are crater, right? Because creditors will always come after you. So make sure you have a pot that's protected from creditors. And what is that pot? It's called an asset protection trust. In 1997, that's when they begin the process of putting these asset protection trusts together. That thing matured over a number of years. Now it's matured. We're at 26, 29 years into asset protection trust. You've got case law to them. If you set them up and put money into them correctly, then you can protect your money. That way your creditors can't get to the money that you have. So you put your assets and stocks and whatnot into this asset protection trust. Your creditors can't get to it. So if the high risk investments that you're taking go sideways and you're called upon to make up for up them, make up for them, and you can't, your creditors can't get to the money that you've taken off the table.

Maggie Pierce 9:47 Okay, uh, before we go too much further into that structure, you say creditors, and I want to give a tangible example of what that means, because I think some people have a misunderstanding where creditors are only people who claim to be wronged by your business or something like that. When a lot of the examples you've given are personal creditors or people who just complete like completely unforeseen circumstances, some of the examples you've given. And I think sharing those would help people understand why it's so important to do this type of planning.

Mark Pierce 10:21 Yeah, you know, let's take, for example, a doctor or a couple who were doctors and they've invested in real estate and they've leased that real estate out to their practice, or they leased real estate out to third parties, that sort of thing. And those doctors work in an emergency room, and one of the doctors is hit with a lawsuit for a malpractice claim. And let's say that there was malpractice. It's inadvertent, it wasn't obvious, but it was inadvertent. And uh the judgment came in and it exceeded the policy limitations on their malpractice claim. And that's beginning to happen because doctors are ripe for the picking because they make a lot of money comparatively. So people are gonna come after them. So the attorney goes over the malpractice claim limits because they want to spook that doctor into doing something that gives them a little bit more money. And what difference would it make, right? If you hit a doctor for an extra $100,000 and then threaten to come after him for a million, are they gonna give you the $100,000? So it's like a form of blackmail. So this these doctors ended up having real estate and they had the real estate in their name and they leased the real estate to their business. Well, what good does it have the real estate in your name? If a creditor comes after you, they can go after that real estate. Now let's suppose that those doctors had that real estate in a limited liability company that was owned by another limited liability company. So you got a holding company that's owned by the doctors, and underneath the holding company, you've got LLCs, limited liability companies that own different pieces of real estate. The judgment against the doctors, they come in, they get a judgment. They're owed an extra two million dollars. They try to attach the shares in the holding company that the doctors own. Well, in Wyoming, they can't do that. All they can do is get a charging order that basically says anything that that holding company pays out has to go to the creditor. So if the holding company never pays anything out, it never goes to the creditor. Now you create phantom income. So you make a distribution to the doctor so that the distribution goes out to the creditor. The creditor gets hit with a tax on, let's say, a hundred thousand dollar distribution. But guess what? It's a paper distribution. No cash is ever distributed. You still have the tax. So the bank that holds the paper ends up having to pay the tax on the $100,000 that's distributed to them to them. Let's say they're a 35% bracket. The bank owes $35,000 and they don't have any money to pay that. Of course, the bank can pay it. They just would rather not have to pay it because they haven't gotten any money for this person. So it's a form of getting that bank to the table to force them to settle the charges or to settle the judgment against the doctors. So that's what an LLC can do. But you have to have a Wyoming LLC, and you have to have a state that allows for a single member LLC. Wyoming has charging orders, Wyoming has single member LLCs. That's one of the ways that you can protect your assets. Out there, they're in wide view, but Wyoming doesn't allow a creditor into that organization. So then what you allow yourself to do is within the LLC, you can make indirect distributions to it to a interest holder. So an interest holder, such as a doctor's, let's say that they needed to go on a family vacation from all the stress of this excess liability. They can have that vacation paid for directly by the LLC as a form of a distribution to the doctors. Well, guess what? Doctors didn't get the distribution, the bank got the distribution, so you send them a $1099 for that at the end of the year. Just throwing it out there, something that you can do. You might have to go litigate that, but you know, the bank is wasting time litigating bad money. And at that point, maybe we could work a settlement. So that's an example.

Maggie Pierce 13:55 Okay. Uh do you have an additional example of uh creditors that somebody might not expect?

Mark Pierce 14:02 Yes. Yeah. I represented a client probably about five years ago, and his 17-year-old son had gone into his house. He and his wife were involved, had gone into their house, and he'd picked up the keys for a car that was in the garage that he was not allowed to drive. Well, he drove it. And he went out with his buddy, and they were doing something. And anyway, they crashed this car horribly and it killed his buddy. So, you know, this guy and his wife, because that's the car a 17-year-old's driving, he should have been driving it. It was done they were responsible for maintaining control over that kid. They didn't do it. They were faced with a very difficult and very costly wrongful death suit. Now, their business was an in a limited liability company, and that limited liability company was owned by a holding company that was owned by a qualified spendthrift trust in Wyoming. There is no way that the individual creditor of those two individuals, the people who owned the car whose son killed this other kid, there was no way that that creditor could get into those LLCs or into that qualified spendthrift trust. So as tragic as it was, it didn't bankrupt them.

Maggie Pierce 15:15 I think that's a good example of that.

Mark Pierce 15:17 It's a real example as well. It's an example of things that happen in life. You know, one of the issues that you run into is that you try to anticipate all the possible types of liability that you could have to protect against them, and you run a very, very careful life. But what you worry about are the outliers. You know, the terrible uh car crashes by one of your minor children who stole a car out of the garage and should not have had access to that car, um, you know, or someone who entered into a business transaction that you should never have entered into, but they didn't he's your partner and you're in a partnership and you're partially liable for it. Those are the things you want to be able to plan for. That's why you take a little money off the table and you put it into a place where people can't get to that money. And then, you know, you're protected so that when the dust settles on those sorts of issues, you can get back to your life and put it back together.

Maggie Pierce 16:09 Okay. Other than the qualified spendthrift trust, are there other and LLCs, of course, are there other things that you recommend people put into place to protect themselves, whether that's insurance or an additional thing that we haven't mentioned yet?

Mark Pierce 16:24 Yes, I think that when you have a holding company that owns a series of LLCs and they're all involved in the real estate business, that you go out and you get an umbrella policy covering a large number of liabilities, that is one of the first things that you can do. That way, when the creditors, when your creditors run into the issue of, gee, we'd like to reach beyond the umbrella policy, they'll settle for the umbrella because it's too tough to get into the trust. So the insurance gives them something, but it doesn't give them everything, and you protect what you have beyond the insurance. Now the problem is going to be is if you're doing something foolish within your business, that insurance may pay out once, but that's the end of the insurance for you. So you have to manage your business correctly as well.

Maggie Pierce 17:05 Okay. Out of the ways you've seen people manage their businesses incorrectly, is there any behavior you think is the most common or the the way people most commonly mismanage their businesses that creates liability for them?

Mark Pierce 17:22 Yes. I think that people have a tendency to think that markets is market, I think that people have a tendency to believe that markets do not crash when they're in them, or that markets always go up when they're in them. And I think that you've seen within the real estate industry over the last 20 years, people just making serious money year in and year out. The problem is no one can afford real estate anymore, so what are you going to do with that? And you look at the way that real estate's been flipped, everybody's in it. And I had back in 1988, a friend of mine called me up and he said, I think we're at the end of this bubble in the market. And I said, Why is that? And he said, Because I got a call from a woman who was in an assisted living facility, and she wanted to figure out how to trade commodity options short so that she could make some real money. And I looked up and I thought she's in an assisted living facility, right? So she's going to take whatever little money she's got left in the bank and she's going to gamble on futures of cattle or futures of sheep or something. He said, That's when I knew this thing was at a bubble and it was at an end. There were people in the market playing games that they couldn't afford to play, thinking they could win. There's just way, way too much emotional anxiety for me to be in. So he got out and he made great timing. That's funny. You know, when it begins to look like everybody can make money and they make it day to day, and that was easy, you're at the end of the rope at that point. And I think that we've gotten to this point here in this market right now with AI. Are we in an AI bubble, Mio? I don't know. And you take a look at what's going on in Israel, take a look at what's going on in Russia, take a look at what's going on in China. You look, you know, we just took over Venezuela, which who in the hell would want it? And you know, you look at that and you go, it's just one thing after another, and you think, how does this end up? Well, you know, it could be fantastic. Yeah, and it may not. So take a little money off the table and watch just in case.

Maggie Pierce 19:20 Um, so we've gone over a couple of different types of structures, LLCs, holding companies, qualified spendthrift trusts. What is the net worth or the asset risk profile where it makes sense to use each of those structures? Who would you recommend use each one? And then who would you recommend avoid using each one?

Mark Pierce 19:43 Well, I recommend that if you have a house, you know, take a look at what the homestead exemption is. In Florida, the homestead exemption, I think, is $5 million or $10 million. Well, you know, outside of bankruptcy, that's pretty much going to stick. Who's got a $5 million or $10 million house? If you do, you're in a whole different level of planning. But leave it alone. Leave it to you got your exemption, things are good. You got a pension fund exemption. Figure out what that is in your state, because they vary state to state. There are some states that allow you to go after pension funds, and believe me, these attorneys for banks and whatnot will go after them. So you look at your pension fund, you look at your insurances, you look at your house, and then you look at uh everything else. And if everything else adds up to $500,000 or more and you're growing it, then you probably should go out and really begin structuring things to anticipate liabilities. Form LLCs, form holding companies, and form a qualified spendthrift trust in Wyoming.

Maggie Pierce 20:37 So if let's say I live in a state that doesn't recognize a qualified spendthrift trust, is there a way I can still incorporate AQST into my estate plan?

Mark Pierce 20:48 In Florida, I counseled a doctor and she said, Well, you know, I've got a house that's exempt from execution by creditors, yeah. And I've got a pension fund, yeah, it does. And I've got a couple hundred thousand, I'm I'm making really good money and those sorts of things, and I'm thinking about getting married. And I said, Okay, that'll sound good. She said, but my attorney tells me that in Florida, an asset protection trust won't help me. I said, Well, why does your attorney say that? He said, Well, because the state of Florida says if somebody sues me here and I have a debt and I have a qualified spent through trust, then they can get into that qualified spent through trust. And I said, Well, that's great, insofar as it applies to immovable objects, because the state of Florida has jurisdiction over assets that are in Florida. But let's get down to it, okay? If you have a trust in Wyoming and you have cash and stocks domiciled in accounts, in LLCs, in Wyoming, those are called movable assets. The state of Florida is not going to tell the state of Wyoming what you can execute against and what you cannot execute as long as it's in Wyoming. And vice versa. So you domicile it in Wyoming and you come to Wyoming and you say, Hey, I've got a judgment from a Florida court that says I'm entitled. To a million dollars. And this million dollars is in a qualified spendthrift trust that this person put together in Florida when they were residents of Florida, Sdamasad in Wyoming. I want to execute that against that. So the Constitution says Wyoming has to give full faith and credit to the efficacy of the judgment that the state of Florida has entered. And Wyoming says that. Absolutely. We give full efficacy to the validity of that judgment. However, when it comes to execution against assets in Wyoming, our execution laws apply. And there's a case out of South Dakota that's directly to this point called Cleopatra. Interesting case name. Basically, what it came down to is that Cleopatra, and this is their actual name, was a daughter of a very wealthy Texas wildcatter who had established a trust for his daughter when she was living in California. She married some man and they had a couple kids, and somehow the man ended up with the kids and she ended up with child support obligations. The trust was redomiciled to South Dakota as they were allowed to do. The state of Florida then issued that judgment. The judgment for child support was taken to South Dakota. And South Dakota said, yes, we recognize that judgment. We give full faith and credit to it. It's a ballot judgment here. What do you want to execute against? What do you want to touch to take and satisfy that judgment? They said, Well, these counts, this money and these stocks. And South Dakota looks up and says, Well, that's great, but this is a movable object. It's domiciled in South Dakota. Your judgment's good, but you can't enforce it in South Dakota against those assets because we don't allow the enforcement of those judgments in South Dakota against South Dakota assets. End of the story. So great. So this individual who was a doctor in Florida didn't get that that's what you need to do. You have movable voices, immovable objects, and said, Well, I don't have to worry about it. And I thought, you know, I've seen a lot of doctors who went, when they got to be 50 years old, going through a divorce, not realizing that if they had established a qualified spendthrift trust, that would have exempted those assets from divorce. And if there were domicile in Wyoming, the divorce court in Florida can't get to them in Wyoming. Why would you not have that money in a QST in Wyoming off the table away from your spouse? And if you'd established this trust before you got married to your spouse, it's not a marital asset. That's your money. That's your asset. That's domicile in Wyoming. And they wouldn't be able to enforce it there. So why would you not do that? Why would you not take that extra protection? Because 36 out of the 50 states who have considered the issue of whether or not that trust is valid as against a domestic support order in some place like Florida, all 36 of them have said, no, that qualified spendthrift trust is not an asset of this person's estate. You cannot attach it. So there you go. You got a unenforceable support order. If you have a state, say like Florida or New Jersey, that don't recognize a qualified spendthrift trust, is there a way that you can have that qualified spendthrift trust as a part of an estate plan for somebody who lives in those states? Here's what it comes down to is that you have movable and immovable objects. Let's say that you're in Florida or New Jersey, they don't recognize a QST. You have an asset of cash or you have an asset of stock, you have something that you can take from Florida, New Jersey, and put into Wyoming. That's a movable asset. What we're getting to here is the full faith and credit clause of the Constitution. That clause says that if you have a valid judgment in Florida and you take it into Wyoming, Wyoming has to recognize the validity of that judgment. Now, when you have assets that are held by that QST, and those assets are in Florida, the Florida court's not going to recognize the QST and they're going to allow someone to come in and take those assets out of the QST and satisfy the judgment. But what about movable assets? What about assets that are domiciled in Florida that are moved to Wyoming? That's a movable asset. The tax cases in the United States from the Internal Revenue Service over the last hundred years go directly to this point. You may have a judgment in Florida that Wyoming has to recognize. However, the enforcement of that judgment against assets in Wyoming is governed by governed by Wyoming law. The definitive case on this is a case called Cleopatra. In Cleopatra, she was a beneficiary of a trust in California that her father had established for her. She got married, she had kids, she got divorced. The kids went to the husband. She didn't pay the child support. The trust was moved to South Dakota. The husband followed her to South Dakota, domiciled his child support orders, that judgment, and said, Give me the money. The state of South Dakota said, We recognize the validity of those child support orders. However, we in South Dakota exempt from enforcement of all judgments, including child support orders, the following assets. And that's what they did. So they exempted from execution those child support orders in South Dakota. So those assets couldn't be taken by the ex-husband for satisfaction of child support order in California. Well, the same thing would happen in, let's say, New Jersey or any other state. You can enforce it in New Jersey, you can enforce it again in Wyoming, but it can only be enforced against assets that are not exempt. And in Wyoming, the assets in a QST are exempt.

Maggie Pierce 27:41 So you've mentioned a couple of different types of structures. You've mentioned LLCs, LLCs with holding companies, and then holding companies owned by a trust. Which structure makes sense for which type of person? When does it make sense to just have an LLC versus when does it make sense to get a qualified Spenthirth trust?

Mark Pierce 28:00 Let's use an example. Let's say that you have a piece of real estate that you've bought that you're renting out, and it's the first piece of real estate that you've ever had. You spent $300,000 and you put down $60,000 and you borrowed $240,000. That's your first piece of real estate. Put it into an LLC and let the bank know that you've done that. That shields that LLC from any of your personal liabilities and vice versa, other than the debt that you went out and guaranteed for the LLC to buy that property. Now let's say that LLC advances in value and you've accumulated some additional wealth. You want to take and you want to transfer that wealth out to you and you want to buy another piece of real estate. So you do that. What you do is you leave six months of working capital in that LLC, transfer out any excess. You take that excess, you put that into another LLC, and you buy another piece of property and you guarantee it like you did on the first piece of property. You're not going to get away from the guaranteed debt. But now you got two LLCs and you own both of them, and they are in a place where people cannot get to the interest in that LLC that you hold. And that's why we said it's very, very important to have a Wyoming LLC. So any excess capital that comes out of those LLCs, now you got two LLCs with two properties. It should be owned by another LLC. So when you get to that second property, put a holding company in place. That way you can funnel up monies, excess working capital out of each one of those LLCs, which you are legally entitled to do and which you should be doing. And it goes directly up to that holding company. You control that holding company. So if there are any problems that go on with any one of those LLCs, like let's say the first LLC has a catastrophe, somebody sues you, you got a million-dollar judgment. What are you going to take it? They can't get to the second LLC, they can't get to the money in the holding company, and they can't get to you. That's why you structure it that way. All right, now you've done it, you're beyond all your litigation, you got enough for a third property. So you put a third LLC over here. Now all of a sudden you've got about a half a million dollars in equity in these things. And this happens, it's inevitable with real estate. It happens. And they're all under a holding company, and you're funneling money up, and you're beginning to really use this money to establish a real estate empire. You've looked at establishing a home office so that you get additional deductions for insurance and whatnot that you couldn't otherwise get. And you want to put together something that really makes sense and you have a great accountant because you're smart. When you bought your first LLC, you went out and you found a good accountant rather than rather than trying to do it yourself, because you know it's really curious that you could spend four years as an accountant, 10 years getting all the practice of being an accountant, and then somebody comes in who's been on the internet on AI for all of 30 minutes and they know everything that you do. What a shock. They don't know what you know. And that's why I tell you you need the discipline of dealing with the accountant. You need the deal of deal discipline of dealing with the attorney. You put that holding company together, now you're sitting there, you got a half a million dollars worth of debt of equity. Now what do you want to do? You want to start planning for the future because now that you've got a half a million, you're gonna get a million. Once you've got a million, Katie Bar the door, you should make a lot more money at that point in time. That's when you need the QST. QST provides you with anonymity as to those LLCs. No one can get through them. You can't get through the first LLC. And if you do, you got to get through a second LLC. And if you do, you got to get into a trust that you will never get through. So a half a million bucks is what I kind of put out to people. Once you got a half a million in equity outside of your home and your exempt assets, like your IRAs or your pension funds, certain types of insurance investments, that sort of stuff. When you get to the half a million dollar, that's when you should start looking at a QST.

Maggie Pierce 31:41 I'm sure a lot of people who are watching this have already thought about putting a structure like this in place. They've already thought about trusts, thought about LLCs. And I think it's really easy to procrastinate and put it off because it's not really something you need until it's too late. So what would you say to somebody who's on the fence about forming, isn't really sure what the next steps are, is afraid it's going to be complicated or anything like that to help them take the next step?

Mark Pierce 32:09 Right. You know, the law distinguishes between planning and reacting. If you have an emergency and you have got to have an asset protection trust, it's too late. You put assets into an asset protection trust after the event has occurred. That event's going to pull all those assets back out, so there's no point to it. The law prefers people to plan. So what you do is you're doing, you're not doing asset protection trust work. You're making a legacy and planning for the benefit of your estate. You're putting an estate plan together to make sure it transitions generationally. That's what you're doing. And the law says, yeah, you should go do that. So you put this asset protection trust together, you put these LLCs together, you do everything above board, and you do it sequentially during the terms of your life, during the term of your life. You're not reacting to an issue that's happened. When you have an issue that's happened, like a car wreck from your kid who's killed another kid and the car wrecked, and then the kid was 15 and you left the keys out on the kitchen table, you got a problem. And that problem is going to come back to haunt you. When you run down to your attorney and say, Oh God, can you help me? The attorney's gonna look up me. He says, Well, there's this thing in, let's say, Texas called the Uniform Fraudulent Transfer Act or Uniform Avoidable Preferences Act. And if I, the attorney help you, the defendant in these issues, put this together, I'm liable for it too. So, you know what? I ain't gonna help you. No matter how much we like each other, okay? Because I can't afford that downside downside risk. So that's what happens. When you have an urgency, when you have an emergency and you have to do it now, you've involved an attorney or an accountant and basically trying to defraud your creditors. So that dog isn't gonna hunt because no one's gonna do that.

Maggie Pierce 33:52 Makes sense.

Mark Pierce 33:53 Now let's say that you come into my office and you say, hey, you know, I've just got the normal issue, nor issues going on, people are suing me for this or that, no major catastrophic issue. I say, good, let's put a legacy plan together. We may have to accept out those claims. But you know, that's just ongoing general course of business type of claims. You know, you had a dispute with a with a contractor, and you he says you owe you, you owe him 20,000, you say no, you put me back, you owe me 20,000. I'm not worried about those. That's just an ongoing business dispute. So you go ahead and put your trust together, you put your LLCs together, and you move forward. Now you may have to accept out those claims, but you know, so be it. It's a small thing. But you've got a legacy together. You put together a plan that allows you to bring your kids into the business, the businesses to grow, and for everybody to profit from that without the necessity of having to pay for your kid's divorce from your child's spouse. Who, you know what, you didn't really like all that much. And let me give you a story. I had a client of mine who was in the process of thinking through a qualified spent through trust, and his son was getting married. His estate was worth about 20 million bucks. And his son was coming in and been working, was a really dynamic kid. And he wanted to make the kid a gift. So he said, Look, I don't have time to put the qualified spent through trust and everything together. I'm gonna put it together after the fact, but I'm gonna give as a wedding present, I'm gonna give my child a quarter interest in a fairly substantial part of my trust. I said, You know, you can do that, but if you give that as a wedding present. In the business, because the trust hadn't been established. So he gets a quarter interest in the business. And I said, Well, you can do that, but if those two get divorced, that his wife's gonna take half. Oh, it'll never happen. She absolutely lovely, they've been in love for years. This is a match made in heaven. Uh-huh. Okay. Well, anyway, you've been warned. About two years later, I get the call. You know, we put the trust together, but she hasn't contributed her portion yet, and now she's divorcing him. What do I do? Pay her off. She gets two and a half million bucks. Write her a check. Well, he says, Well, how do I avoid that? I said, I gave you the way to avoid it. And you said no. So there's your match made in heaven for her. So they paid her the two and a half million bucks away she went. Now it gets more interesting. So they get together, they put the trust together. And about five years after that, he calls me up and goes, Oh my God, you know, I've been married for 35 years. My wife, who helped put this trust together, is in the process of divorcing me because I discovered she'd been having an affair for 30 years. You know, let's not get into that. I'm like looking at going, how could you not know, right? So 30 years with the guy who trains her horses and they're in love and they're gonna go off, and she wants to have half of the trust. I said, okay, now that you have the trust and she signed off on it, we got a whole different deal going on here. You have a contract. So she wasn't entitled to an unfettered half. She was entitled to one fifth, but not out of the trust. If and when the trust made a distribution, she got a fifth of it. Maybe. So what we ended up doing is we negotiated a settlement with her. She took two million in lieu of, you know, half, basically half an estate that was then worth 30. So from 15 to 2, I considered it a victory. So she took her 2 million and went home. Now the trust worked. So, same client, bad result, ignored the advice. Same client, good result, because he took the advice. So that's what you have to do. I know that I started being a lot more successful as an entrepreneur when I hired a very good attorney, shut the fuck up and took his advice. So I'm a good attorney. I know what I'm talking about. Shut up and take my advice. Or I can sit and listen to all the rationalizations you've got about how life shouldn't be the way it is, but I can tell you how it is, you know, with certain things.

Maggie Pierce 37:50 How from start to finish, when you start with the initial consultation with the client through getting the documents notarized and being done with the trust, how long does the process take to actually set up?

Mark Pierce 38:04 You know, from the time that you contract with me, we go through the questionnaire, we have a couple different conferences on it, structure the trust and whatnot. If you're really dedicated to doing it and understanding it and stay on top of it, two to four weeks. And then once we get the trust established, we have to put assets into it. That can take, it depends on the type of assets you have, where they're located, and how much time and effort you want to devote to it. But typically most of your assets can go into that trust almost immediately.

Maggie Pierce 38:34 Amazing. Do you think that people put off the plan because they don't realize how easy it's going to be?

Mark Pierce 38:41 Or yeah, I think they're timid. You know, they're they're never ever quite sure. And if you're not quite sure, then why did you call me and talk to me? I know what I'm talking about. You know, and I run into in this area a lot of people that just quite frankly think they know more than everyone else does. And so as a result, you know, they they they put things aside, they don't get things accomplished, they vacillate back and forth. But my experience has been the people who grab onto this do it quickly and move forward quickly and learn how to do it, they're successful. The people that sit there and waffle and go back and forth, they're not so successful.

Maggie Pierce 39:13 How do you approach the planning conversation differently when somebody has a family business versus when it's just an individual without a family business?

Mark Pierce 39:22 Yeah, yeah, yeah. That's a good question. You know, it depends on the family, but what you want to do is you s you have to have a heart to heart with somebody. And I've known in the context of ranches in particular, the only kids who stay on the ranch are the ones who just shouldn't be running the ranch. Everybody else goes to town and gets a good job because ranching's hard, it's isolating, and it's it's not economical. So typically the kids who ends up doing it has no other opportunity. So once they get the ranch, they run it into the ground. So you really have to sit down with people and say, okay, you've got five kids. How do you want to work this? Because you've got four of them working full-time, they're not going to be able to come out and provide help when they need to. You may have quarterly meetings to do that sort of thing. But the one who is running the ranches in town every night getting drunk and driving back and forth uh like a madman. So how do you really want to see this going forward? How do you really think that at the end of the day you're gonna be able to make this a family heirloom because people aren't treating it that way? That's what I run in there. But with family businesses, you have to have a heart to heart and you have to know who can run the business, who can work in the business, and who should not be running it or working in the business. And that's something you really have to sit down to and and and be heart to heart with the people in the family. In my experience, most families can't do that. So the answer is it's very difficult and it and it it it it just goes, you know, family to family. Now I have seen families who have been successful at it, but they're typically the families that have learned to work together a long time and to express their emotions effectively and civilly to one another. And there are also people who understand what the what the expectations are and what the limitations are with those family members. If you have that, you can have a successful family business. And that's why something like 90% of family businesses fail in the first generation.

Maggie Pierce 41:16 Interesting. That story reminded me, I can't remember whether it's Kellogg's or Johnson and Johnson, but one of those, the heirs still benefit from the business, but they have a rule where they're not allowed to work in the business. It's under professional management, and the heirs are not allowed to get jobs at the business.

Mark Pierce 41:36 Well, I don't know if you remember this, but when we were living in Boca Bertome, there was uh there was a family who had established an aerospace business. And he and his wife had been incredibly successful, and they had three kids, and all three of the kids were very intelligent. Uh, but some were a little bit more adept at conducting their lives than others were. So the kid who we knew, nice kid, they basically said, Yeah, don't show up here anymore. Here's a beautiful home, stay down there, make babies. And they had six kids. And there were two wings to their house, one with three kids, the other one with three kids. Each one had a nanny, and then each wing had a nanny overseeing nannies. They spent their entire day running the kids around. But that was his job. Produce kids, stay away from the business. Yeah, yeah, work for them.

Maggie Pierce 42:27 Uh uh the next question, kind of similar, is do you approach the conversation differently based on because we've talked about how you work with both high net worth families and entrepreneurs, but also just high in high earners in professional fields like doctors, lawyers, things like that. So how do you approach the conversation differently if the person is an entrepreneur versus high-earning professional?

Mark Pierce 42:52 Yeah, you know, an entrepreneur is somebody who has to who has to repeatedly come up with new ideas and new ways in which to approach business and but new businesses, some of which are successful, others are not. When you're dealing with, let's say, a doctor and they're in an established practice, what are they going to do? They just continue to develop the practice. So you know that your income level is a certain amount, it's probably going to increase over time. So it's a much different measurement. Whereas you're you're protecting from liabilities coming off of the practice, so you bifurate bifurcate the practice from the business. With an individual who's an entrepreneur, you may have one good business, one bad business, one good business, three bad businesses, two good businesses, no bad businesses. You never know what you're gonna get because you're taking chances. So it's a completely different dynamic. So you need to isolate the practice from the business for the doctor. And then on the entrepreneur side, you need to isolate the businesses. So it's a difference in practice coming in.

Maggie Pierce 43:48 That definitely makes sense. So then the final question if somebody decides after hearing you talk about this that it's time for them to take the first step and get started, what should they have ready before that first conversation?

Mark Pierce 44:03 Well, I think more than anything else, you know, I need to sit down. Are you married? How stable do you think your marriage is? Is it a successful marriage? Who are your children? Are your children going to come into your business? Are all your children able to come into the business? If so, how would you propose to manage that? What are your expectations for the future? Do you see this becoming generational? Or do you see your businesses being dissolved or liquidated and then you have cash and you make a passive investment off to the side? How are you seeing this develop over the next 20, 30, 40 years? And if you have, for instance, a business that sit there and spews money, maybe it spews money over to an asset protection trust, that asset protection trust then provides for your family over here. So you would have somebody managing that much different than you would having them manage the business itself. So what do you want? Where do you want this to go? How did your family stack up? Who's capable of doing what? And if everything panned out the way that you wanted to pan it out, where would you see yourself in 20 years?

Maggie Pierce 45:03 Great. Normally you'd chart for a consultation, but for listeners of this podcast, we'd like to offer a complimentary consultation with Mark, which you can book through the link in the show notes or in the description below if you're watching on YouTube. So thank you everybody for listening. Mark, any last words before we sign off for the day?

Mark Pierce 45:23 You know, at the end of the day, go put yourself in a position where you can't fail. Put your LLCs together, put your trust together, and go on and live your life. Now you know at the end of the day, no matter what happens, you'll be okay.

Maggie Pierce 45:35 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.