Derek Dombeck sits down with Attorney Lee Phillips of LegaLees LLC to delve into the intricacies of LLCs and asset protection, debunking myths and shedding light on crucial legal nuances often overlooked. Lee dives into the historical context of LLC formation, highlighting the unique blend of corporate and partnership elements that define this business structure. He addresses misconceptions about LLCs, the significance of proper management and formalities, and the implications of recent legal developments. Join the conversation to gain valuable insights into safeguarding your assets and maximizing the benefits of your business structure.
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Shielding Your Assets: The Truth Behind LLC Protections With Lee Phillips
Introduction
Welcome to the show. This is the podcast where we try to live our vision and love our life. We are sponsored by the Real Estate Circle of Trust, which is my mastermind. You can find information about that at Reicot.com. I bring that up because our guest today, Lee Phillips, actually was a part of a mastermind in a separate group from myself, but that was where we started to get to know each other. I’ve also seen Lee speak many times, and his topic is extremely important and one that I personally feel people do incorrectly all the time. Lee, thank you so much for giving us some of your time. If you wouldn’t mind, just let my audience know who you are, and we’ll jump right in.
Thanks, Derek. I’m Lee Phillips. I’m a lawyer that’s tax for an attorney. You all get down and see your lawyer. Derek, I went and had my colonoscopy a couple of months ago. Everything turned out fine. I’m okay, but the cleanout’s horrible. Have you ever done one?
I’m trying to avoid it. No, not yet, but I’m 48.
You have to clean out. I get the colonoscopy, I wake up in the recovery room, and there are all these people standing around looking at me. It actually kind of weirds me out. Finally, I realized why all these people were standing around looking at me. Derek, do how rare it is to see a lawyer that’s not full of shit?
Yes.
I’m a US Supreme Court counsel, a US federal tax court attorney, and all kinds of garbage. Let’s just go.
Let’s just go. I love it. That’s why I always enjoy our conversations because we don’t beat around the bush, and you’re too expensive because you’re an attorney. We got to talk fast.
Attorneys cannot say hello in ten minutes.
Prevalence Of Misinformation
No, absolutely not. Lee, I’ve been around and doing this since 2003. I’ve been through different types of asset protection courses over the years. There’s a lot of misinformation out there. I believe a lot of it is just to sell courses, LLCs, corporations, trusts, and entities. You’re primarily an advocate for the LLC, correct?
The LLC is a pretty cool tool that the lawyer has available today. There is a lot of misinformation on it. The fact of the matter is the vast majority of them do not protect the person when somebody slips and falls in the rental unit. It’s in an LLC. The corporate shield is supposed to protect you. Cannot sue me, got to sue the corporation or the LLC, and it doesn’t work. People don’t get any more tax advantage out of it. The problem is, the lawyer never brings you in and says, “Look, you’ve got the LLC. This is what it is. This is how you have to use it.”
This is what you have to do in order to make it work for you. Your accountant never brings you in, puts his arm around you, and says, “We need to teach you how to use your little company. We need to teach you how to use your real estate as a tax shelter.” Those two, your company and your real estate, those are your two tax shelters right there. If we can cut your taxes by 20%, that’s a big deal, but you’ve got to know how to use these tools, these legal tools. Just getting the piece of paper from the lawyer or off of LegalZoom or wherever it is, the piece of paper doesn’t do you any good.
You’ve got to have a piece of paper, don’t get me wrong, but you’ve got to do a lot of other things. This whole thing is basically a scam, Derek. The federal government and Congress give us these tools, the LLC, the corporation, the corporate shield, and it’s a carrot. They hold it out in front of you and they say, “Little business guy, you start your business and we’ll protect you.” Does the federal government really want to protect you? I mean, if your delivery van hits a kid in the crosswalk and paralyzes them, does the federal government really want to protect you? No, they want you to pay for that kid.
They give you this bait, this carrot, and say, “We’ll protect you.” Then they put a whole lot of, by the way, if, ands, buts in it. The fact of the matter is the lawyers and the websites don’t teach you about the ifs, ands, or buts. Derek, this isn’t a real company. You didn’t treat it like a real company. This is just your alter ego. Your honor, I don’t have to honor this company. I don’t have to honor the corporate shield. I can sue this guy directly. I can sue him personally. The vast majority of times, the court says, “That’s right, sue him personally.” You’ve got to manage these things. You’ve got to keep them up. Just getting the piece of paper isn’t enough.
There are even state laws. Utah has a state law. I’m licensed in Utah. This says, “You don’t have to follow formalities. You don’t have to do anything for your LLC.” Yet, they are setting aside the corporate shield of an LLC every day in Utah all day long. The whole thing is it fair to you to have to treat this like a company and not be able to go after these guys for their individual wealth? The answer to most of them is no, it’s not fair. You can go after them personally because they didn’t treat it like a real company. I’ll give you an example, Derek. All the gurus say, “You’ve got to put your piece of real estate into the LLC.” Isn’t that what they say?
Yeah, absolutely.
How do you get it in there? Use deed. Now, on trust and stuff, I can use a quitclaim deed because that’s moving the piece of property from one of my front pockets to the other front pockets. I’m still in the pants, but an LLC is a unique animal. It’s different. It’s not you reincarnated. At least it shouldn’t be. I need to use a warranty deed. Make out a warranty deed. Move it from you to LLC. No big deal. You just moved a $400,000 piece of property into this LLC. What did you get back? I mean, if you give Amazon or Walmart or anybody else $400,000, what do you want back to say that, “I gave these guys $400,000?”
You want the revenue. You want the proceeds.
I want a stock certificate or something. A note? Something that says I gave him $400,000. Your honor, these people put this $400,000 piece of property in there, and they didn’t get one thing back that says that they put $400,000. This thing’s a scam, your honor. They know that it’s just them reincarnated. I’m not going to give your LLC, Derek, a $400,000 piece of property unless I get something back that says I get a chunk of your company, or I get a note or something. Your honor, there’s none of that. This thing’s a scam. They know it’s just them reincarnated. Let me sue them personally. Can you see the argument?
100%. I would go as far as to say the other reason that it’s easy to pierce the corporate shield on most of them is, that you talk about the additional paperwork, how many people do resolutions every time they make any decisions for their entity?
That’s part of the formalities that we’re talking about. You’re absolutely right. Over the years, the courts have said, “Look, in order to prove that this isn’t just your alter ego, you need to do this, this, this. The courts have laid out, we call them formalities. The courts have laid out these formalities. The name of the game is to get into court and say, “Your Honor, I did this, this, this, this. This is what you guys say I need to do in order to actually have the company and not claim it as myself, I’ve done all this stuff.” Nobody does all of this stuff. It doesn’t work.
In fact, they don’t even know what they need to do. Let me give you a two-second history lesson. LLC was created in 1977 in Wyoming. It was a slow year, middle of the winter, the Jackrabbits ain’t running, there’s nothing to do in Wyoming. They created this thing called an LLC. Basically what they did is they married a corporation and a partnership. I got the corporate shield from the DNA of the daddy corporation. I got another piece of asset protection from the mommy partnership. Derek, you just said there ain’t no asset protection in a partnership. Anybody knows that there is. You don’t know that there is, but there is. We got the DNA from Daddy Corporation.
We got the DNA from the Mommy partnership. We got this asset protection too. In LLC, the reason the LLC is popular, and most attorneys cannot tell you this, the reason it’s popular is because it gives you twice the asset protection of a corporation. If the attorney thinks about it, he can, yeah, okay. There’s a guru running around selling a kit for an LLC setup. Never mentions this other asset protection. Just mentions the corporate shield. Yet I have seen more people save their butt because of this other asset protection than I have the corporate shield.
State Registration
A 100%. Let’s go back to the birth of the LLC in Wyoming and expand on that. Just a touch because oftentimes people are like I’m going to have my entity registered in Wyoming or Delaware or Nevada. Then they have to have a registered agent in the state that they’ve got the company formed or in the state that they’re doing business in, what’s your feeling on all that hocus pocus?
I can sum it up in two letters. The first one is B. Do you want to guess what the second one is?
Pretty sure we all know what the second one is.
It’s an S. BS. Look, the only reason these guys want you to put it in Wyoming or Delaware or Nevada or Utah is there’s a big group running around selling Utah. You can get three Utah LLCs for like $6,000. I live in Utah. I put my LLCs in Utah because that’s where my business is but we don’t have very good laws, but it doesn’t really matter. When you buy your piece of property in Florida, and you’ve got a Wyoming or an Ohio or any other LLC, you have to register that in Florida in order to own the piece of property. If you don’t register it, I got news for you. I’m your tenant, I figured out you ain’t registered in this state, and I ain’t paying your rent because you cannot do a thing about it.
You don’t have any rights in Florida. When you register the Wyoming company in Florida, Florida has specific laws. Every state has specific laws that say, “You are now subject to all Florida laws. I don’t care what Wyoming says. In theory, I’m supposed to use some procedural, some stuff about Wyoming.” The judges in Florida, they don’t have to go to Wyoming to sue you. I got news for you. By the way, the Wyoming LLC, it’s private. I got news for you, Derek. I can tell you what brand of underwear you’re wearing. How bad it stakes.
That’s a little bit more information than anyone needed.
Seriously though, with the systems we have today and as long as we’re on that, do you know what FinCEN is?
I’m familiar with it, but I would venture to guess a lot of listeners are not.
We need to tell everybody this is important guys. FinCEN is the little brother of the IRS. It’s the Financial Crimes Enforcement Network. These guys do have guns. They’re under the Treasury Department and they’ve passed a law, which is called the Corporate Transparency Act. It was passed in 21. It says that it starts on January 1st, 2024. Any entity that was in existence prior to that has to be registered with FinCEN this year. That’s corporations, LLCs, and limited partnerships. Anything you file with the state has to be registered with FinCEN. They want to know all the beneficial owners.
Anybody who owns 25% or more, anybody who gets money, anybody who can influence this company, you’ve got to register as a beneficial owner. I’ve got to upload this guy’s driver’s license and address and name, rank, serial number, blood type, and everything else. This has got to be done for existing entities prior to January 1st, 2024. This has got to be done during 2024. If you don’t do it every day after December 31st, 2024, it’s a $500 fine plus $10,000 plus two years in jail. That’s a heavy hit, boys. If you create a new entity this year, you have 90 days from the date you file at the state to register everything with FinCEN.
These guys are dead serious. On March 1st, Friday night, the federal court in Alabama sent down a ruling. The whole thing is unconstitutional. It’s a piece of crap. What the judge said about this is for, but it’s true. FinCEN came out about three days later and said, “The National Small Business Association, they sued us. We will agree as of March 1st, members of the National Small Business Association, they don’t have to worry about it. They’re protected.” It isn’t constitutional for them, but all the rest of you guys, it’s constitutional for you and damn it, you’re going to register or we’re coming after you. It’s a big deal. Next year you set up a new entity, and you’ve only got 30 days.
Here’s the Corker. Let me back up for two seconds. If it’s unconstitutional for that guy, why isn’t it unconstitutional for me? Did I miss something? Next year you’ve got 30 days. Here’s the Corker. If you have five guys, five beneficial owners, anything changes on any one of these five guys, a new driver’s license, a new address, a new phone number, a new nothing. You’ve got 30 days to re-register with FinCEN. It’s going to be impossible to keep this maintained. You cannot do it guys. I’m sorry. I’m sure that the first thing that this guy thinks when he gets a new driver’s license, I got to tell the company they got to register with FinCEN. As a result, you screw up $500 a day plus $10,000 plus two years in jail. They have the ability to destroy any small company now.
That’s if you make a mistake. If you intentionally are trying to avoid registering, it’s stiffer penalties, correct?
I think it’s the same penalties, but they’re stiff. They’ve said well, we probably won’t put you in jail unless it’s intentional. Thanks. This is according to Lee. It’s we won’t put you in jail if it’s intentional or if we like you but if we don’t like you.
They still have the right to do it.
They still have to do it, yup.
Are you aware of lawsuits that are pending now to try and reverse this?
The Small Business Association started their lawsuit in 2022. It takes years to go through this. No, I don’t know of any legal action that’s taking place right now. Do you want to know another corker? Here’s one you don’t know, Derek. They came out about 4 or 5 weeks ago and said, “By the way, we are putting a new rule in effect. It isn’t there yet. The new rule says that you have to register every real estate transaction. Any change in ownership of your real estate, you have to register.”
That’s attached to the same Corporate Transparency Act or is that a new act?
It’s just a regulation that they’re putting into place. They’ve given up. The federal government has given up on legislation and course. They do whatever they damn well please. I’m sorry to say that, but I believe it.
No, it’s true. Honestly, given that it’s an election year, I don’t know if there’s anything that anybody’s going to do to rock the boat.
Nobody’s going to do anything. We have to register. Get that over with, get it done.
Isn’t it interesting how there’s very little discussion of this anywhere in the press?
There’s no zero discussion in the press. Never seen an article on it. In fact, most people don’t know about it. That’s why I’m happy to talk about it right now. I spoke to an audience last week. How many of them knew about FinCEN? A couple of hands go up, nobody knew about it. This thing is hanging over them like the sword of Damocles. It will be crushing if they decide to come after you. They’ll destroy you.
A 100%. The circle of people that I run with and a lot of them are friends of yours as well, we all discuss this, we talk about this in mastermind settings and things of that nature, but think about the small landlord that has 1 or 2 properties in one LLC, and they still have a full-time W2 job. They’re not out there seeking this information. They’re not listening to this show.
The problem is the accountants and the lawyers aren’t going to talk to you about it because the accounts and lawyers decided this is too big of a liability. If I take you on, I register you, I say, “I’m going to keep you up.” I have to monitor you every two weeks to make sure that nobody’s changed their driver’s license or their address or anything else. They cannot do it. The professionals are basically saying, “We ain’t touching this one, baby.”
The professionals that want to do it and form LLCs can now jack their pricing.
They can jack their pricing. You have to register it originally, but then they’re going to turn it over to you. They may do it for you originally, but they’re going to turn it over to you. They’re not going to maintain it. No, nobody’s talking about this. We got off kind of off-topic. Let’s go back and talk about the LLC for a while because it’s pretty cool, even though you have to register it now.
By the way, I told you that there is no such thing as privacy, particularly now that FinCEN’s here, they’re going to share this information with the state. They’ve said they’re going to share it with banks. It’s going to be widely disseminated information. They’re going to share it with all agencies of the government. That’s a new law that they put into effect. It’s going to be all over the place, guys. I’m going to really tick when I start getting emails from Joe down the street because he’s picked me up on FinCEN.
Trusts Vs. LLCs
What about your feelings on trusts versus LLCs?
Trusts give you zero asset protection, land trusts. Having said that, there are dozens of different types of trusts and there are some that do give you asset protection, but the living revocable trust that you’re going to use for estate planning, zero. The land trust that you’re using to hold your property in, zero. The answer is no, they’re not going to give you any asset protection. Absolutely, you need a living revocable trust to avoid probate on all the assets when you die. Your attorney will stand there, probate isn’t too bad.
We’ve got laws that say that it’s a maximum of 1.5%, 2% of the value of the estate. If the attorney doesn’t ask for extra, then the attorney is always going to ask for extra and the court’s always going to give it to him. They’re still going to take advantage of the family. It’s a time when they’ve got the family on the ropes. The majority of attorneys will take advantage of you. Just avoid the whole problem with a living trust. There again, you’ve got to know how to use it. That’s what the attorney never tells you how. My father-in-law in 1976, paid $8,500 for a living trust.
That was a lot of money, boys. He got a good one, which Fortune magazine says that less than 1% of the lawyers in the United States know how to draw them properly. Not a good statistic. He got a good one, but when I looked at it in the early 80s, it wouldn’t have done him any good because the lawyer didn’t teach him how to use the trust. Now, you’ve got to understand my father.
All he said there and he argued with me about it. “No, my lawyer, he taught me.” “No, they never teach you how to use the trust.” That way they get the big bucks for setting it up. When the guy dies, the family comes back to them and they get the probate. You’ve got to learn how to use this on your own. You’ve got to learn how to take care of your LLC on your own. Nobody else is going to tell you about it.
You've got to learn how to take care of your LLC on your own. Nobody else is going to tell you about it. Share on XNo, and that’s the same thing. That’s what we’ve done over the years, trying to, again, build that network and talk to people that have dealt with it on their own and gone through, unfortunately, some of the horror stories. Learn from other people’s mistakes. It’s not an exciting topic, but it’s a very important topic that most of us entrepreneurs put off until it’s way too late.
You put it off, you put off the asset protection, you put off the estate planning. The problem is, if you can see the problem, it’s too late, it’s over with because you cannot go back and set up the LLC and transfer assets into it. We have fraudulent transfer acts and fraudulent conveyance acts. All these say that if you can see the problem if the problem exists, you cannot then plan for it because you’d be screwing your creditors that you know want to come and get you.
You put off the asset protection and the estate planning. The problem is, if you see the problem, it's too late. It's over with. Share on XEvery state, we’ve all passed laws that say, “Cannot do that.” Let me go back to the Wyoming stuff for a minute. I said that you’re subject to all of the laws in Florida. You’re making your money in Florida. I don’t care that Nevada doesn’t have a tax. You’re paying the tax in Florida, plus you’re filing a tax return in Nevada saying, “I don’t know anything.” Plus you’re paying the guy in Nevada. Exactly why are we paying this guy? What does he do for us? Zero. If I can get 10,000 people paying me 100 bucks a year to do, zero. That’s a pretty good business.
It is.
You’re paying the tax. Privacy, I don’t think so, particularly with FinCEN now. You’re using Florida law. You’ve got to explain to me exactly why you have your Wyoming or Utah LLC. I’m going to tell you, you’ve got your Utah LLC, just take your lumps, say you’re sorry, I wasted my money and do it right.
Manager-Managed Vs. Member-Managed LLCs
I agree. One thing that I spent a lot of time on over the years was figuring out the difference between manager-managed LLCs and member-managed LLCs. FinCEN, I believe, is going to kind of kill all that anyway, but can you explain that as well as what’s the difference between a single-member and a multi-member LLC?
Two things there. First of all, the first question that was asked in 1977 when Wyoming created it was, how is it going to be taxed? The IRS came back and said, “It sounds like a corporation to us, how do we know it’s not a corporation?” The deal was that there are four elements of the corporation, the limited liability shield, and what we call continuity of life. That’s not the term of the company. That means that if one of the members, one of the owners dies, the company continues on.
Transferability, which means I can sell stock, and centralized management, which means that the officers and directors do not have to be owners of the company. Wyoming came back and said, “The way we’re going to say the difference is corporation has four, LLC only has two.” You get to pick which two. You’re going to pick the corporate shield. That’s what you want, it’s the asset protection. Which one of the other three do you get? I don’t care. You’ve been to the lawyer and you’ve said, “Do I want it manager-managed or member-managed?”
The guys looked at you and said, “It doesn’t matter, just pick one.” It does matter, you idiot. If you pick manager-managed, you pick centralized management. I’ve got my corporate shield and I’ve got centralized. I got my two. If you pick member-managed that means only an owner, a member, we don’t call them stockholders we call them members, only a member in an LLC can manage. You’re not going to hire a hired gun to come in and manage your little company, you’re going to do it. You don’t need manager-managed, pick member-managed. I can pick one of the other two, transferability. I’m not going to sell stock. You’re probably going to pick the centralized manager.
Continuity of life, which means the company goes on after you die. Fine, no big deal, but if you’ve got three of these, you don’t get a corporation, that requires four. You don’t got an LLC, that’s two. What have you got? A partnership. I’m going to get your operating agreement when I sue you. It’s the first thing I do. I’m going to read it. I’m going to see which of these you’ve got. They’re defined in your operating agreement. If you’ve got three, I turn to the judge and I say, “Your honor, by definition of law, these guys do not have an LLC. They’ve got 3, not 2. You don’t have a corporation because you don’t got four. You have a partnership. I can sue you personally.” Can you see how it works?
Yeah, absolutely.
You have to understand what each one of these is. I will tell you that 90% of the lawyers don’t know this little piece of history that we’re just talking about. They will say, “Member-managed, manager-managed, doesn’t matter, pick one.” It does matter, boys.
That’s the part that I’ve always found interesting, being in Wisconsin, when I first started 20-plus years ago, I went to a local attorney and they actually set us up with an LLP instead of an LLC. It was my wife and I. We had some conversations and I was going through my own self-education and going to seminars. I always found it really interesting that nobody in my local area understood what I was asking them to do.
I stopped educating the attorneys in my local area and I went and sought out attorneys on a national level that I felt were more educated and had better strategies. The theory is if the local attorneys don’t know how to set me up, they also don’t know how to come after me and certain things have changed in twenty-plus years. I do believe there’s still so many attorneys, as you just said, they don’t really necessarily know the difference.
They don’t. You need to know the difference. It’s not hard. It’s really easy. You need to know the difference. You ask that question. The other question you ask is, what’s single-member or multiple-member LLCs, and why is that important? The corporate shield is over here. The other piece of asset protection is called the charging order protection. What it does is it protects the assets of the company from what happens to the owners, and the members if you get sued.
They cannot get the assets of the company if you’re sued personally. That’s pretty cool because, frankly, you’ve got a better chance of getting in trouble personally than you do in the company. I want to protect the assets of the company. That makes it so that if there’s a slip and fall in one rental unit, they can get the assets of that LLC, but they cannot come and get the assets of my other LLC. This is important, guys. I need to give you a history lesson for two seconds, okay, Derek?
Yep.
Me, you, and Joe, we go into business. Two hundred years ago in England, the only type of business there was a partnership. Joe gets in trouble, he gets sued, and he gets a judgment against him. They take Joe’s partnership interest. That guy is now our partner. He comes in, he sells the partnership, and he does whatever he wants. That’s what a partner can do. Wait a minute, you and I lost everything we’d worked our whole life for because Joe screwed up. That’s not fair. The Brits said, “That’s not fair.”
In 1890, they passed a law that said that when this guy got a judgment against Joe, he couldn’t take his partnership interest. He had to go to court and ask for an order that charged the debt that Joe owed against the partnership. Now you and I, still get to do the partnership. It’s still ours. They cannot tell us what to do. They cannot sell anything. They cannot do anything. If we issue a profit, the creditor, not Joe, gets it. We still love Joe. We’re not going to issue many profits, but this is called a charging order. Basically, it says that this creditor gets an economic lien against our partnership.
The LLC got this piece of the DNA from the MAMI partnership. We now have a corporate shield and a charging order protection. Here’s the problem. The Uniform LLC Act 2006 says that the only remedy for a creditor of a member, a guy suing an owner, is to get a charging order and this is changing. Here’s why. There was a little case in Colorado, the first big case was in Florida, Mr. Olmsted. Mr. Olmsted is a dirty dude. He embezzled tens of millions of dollars from Floridians. They get him, they put him in jail, and they say, “Mr. Olmsted, all of those tens of millions are sitting over there in an LLC.”
Now, Mr. Olmsted’s read the law. He says, “Screw you. You cannot get to that if you sue me. I’m never going to issue a profit. I’m sitting in jail. You cannot get to those assets because your only remedy is a charging order.” That’s what Florida law said. Mr. Olmsted stuck his tongue out at the Supreme Court justices in Florida and said, “You cannot get to it.” He told the Supreme Court justices in Florida to go pound sand. There’s only one problem with that. There’s a lot of sand in Florida. The Supreme Court justices ain’t interested in pounding sand.
They scratched a little noodle and they said, “Wait a minute. What’s the purpose of the charging order?” It isn’t to protect Joe. He screwed up. We don’t care about him. It’s to protect Derek and Lee. Mr. Olmsted, you don’t got any Derek and Lee. This is a single-member LLC. Screw you. Henceforth and forever in Florida, single-member LLCs don’t get charging order protection. We now have about eighteen states or so that have gone along with that.
It’s logical because it isn’t to protect the guy in trouble, it’s to protect the other partners. To get the charging order protection, you need other partners in many states now. I would go ahead and get other partners in Wisconsin. Now, Wisconsin is a screwed-up state. It has community property law. Community property law is a remnant of Spanish law. All the other states that have community property laws are down on the southwestern border where the Spanish influence was heavy and Puerto Rico, but Wisconsin’s weird.
You cannot use husband and wife, husband and wife in the community property state or one legal entity. You’re going to have to put a kid on for 5% or whatever. You’ve got to treat the kid like a real partner. He gets his 5% of the profit or loss. He gets to go to meetings, all of this stuff but I need another part. Even in a common law state where husband and wife are two legal entities, I would have a kid or somebody else with me.
That’s something that, again, doesn’t get talked about hardly enough, in my opinion, because so many people are living in this structure, even very experienced real estate investors. They may buy a property in a trust, and then the beneficial interest of the trust is in an LLC, which I don’t mind that structure, but then they’ll have the beneficiary as a single-member LLC. It takes a little bit longer to get through that structure, but the end result is still not going to be what you want. Now, with FinCEN, it really kills that model significantly.
It kind of kills the model, but the model doesn’t work anyway, because I’m not interested in who the beneficiary is. I’m interested in who the grantor is. The trust says that the grantor can revoke the trust. When I sue the grantor, the guy who set up the trust, I get a judgment against him, I say, “Your honor, make him hand over the property. I don’t care who the beneficiary is.” If the trust has what’s called the spendthrift provision, which basically says the beneficiary and their creditors cannot get to the trust.
It’s a paragraph. That’s all it is. People come to me all the time. I have a spendthrift trust. Big deal. You’ve got one paragraph in your trust. Tell me something else news. If the spendthrift provision is there, I don’t care who the beneficiary is. If the beneficiary gets sued, they cannot come and get the assets of the trust. This concept of the LLC being the beneficiary, there’s a little bit of benefit in it, but almost none, guys.
This concept of making the LLC the beneficiary offers little to no advantage. Share on X
Conclusion
Awesome. As much as we were kind of joking about this before we started the show today, you cannot tell a quick story. Oftentimes, people think that asset protection is not an interesting topic, but time has flown by. I really appreciate you being here and sharing it. We haven’t really gotten time to talk about taxes and other things.
That’s a whole other issue and by the way, Derek, your biggest asset protection threat is the IRS. They’re taking 25%, 30% of everything you bring in the door. Isn’t that an asset protection loss? Yet you don’t have any idea how to cut your taxes. You just do what the accountant tells you to do and he isn’t going to tell you anything because as soon as he starts to counsel you, he’s liable. He’s learned to keep his mouth shut. We got another two hours to talk about taxes someday, Derek.
Your biggest asset protection threat is the IRS. Share on XYeah, we’re going to have to have you back on, Lee. I know that you did have a mini course that you were wanting to give the audience, which before you talk about it, you can find that at TheGenerationOfWealth.com/LLCMiniCourse, but what’s in there, Lee? By the way, we appreciate you offering that.
It’s about 25 pages of how to run your LLC. That’s all it is. It’s straightforward. It’s just information on how to use an LLC.
You say that’s all it is, but that’s gold because 99% of people do not know how to run their LLC.
It is gold. There’s no hidden trap in it. I don’t sell your information. I do get your email address, but I don’t sell your information or any of that crap.
No, and I know that because we’ve got a relationship and a history and that’s one of the goals for all of my guests on our show is to bring in people that have the right morals and ethics. Even though you’re an attorney, I know you have the right morals and ethics.
That’s really rare.
I know, absolutely.
You did hear about the attorney who had the farmer as a client. He needs a signature. He goes out to the farm and it’s early in the morning, steamy coming off the grass. You know what I mean? Sure enough, he gets there and the farmer’s out in the middle of the cow pasture. The attorney hops the fence and his three-piece suit and he’s trucking across the cow pasture, and he steps in this big pile. I mean, it’s still warm. It’s steamy. He looks down at his leg in this big pile and he says, “I’m melting.” You didn’t admit it, Derek.
I got it already, but you’ve got to remember, I’m from a farming country. We’re very familiar with that.
You’ve been melting many times, huh?
I don’t know about me, but other people I know. Yes, for sure. We thank you again for coming on the show and spreading your knowledge.
Thanks for having me. Appreciate it.
For everybody else, thanks for joining us. Again, please like this, comment on this, share this, and give us ratings and reviews anywhere that you find this show. Again, the LLC mini-course that Lee’s given out is TheGenerationOfWealth.com/LLCMiniCourse. The show’s been sponsored by Reicot.com, the REI circle of trust. Until the next episode, go out and live your vision, and love your life. Have a great day.
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About Atty. Lee Phillips
Attorney Lee R. Phillips is a nationally recognized attorney who has helped thousands of audiences understand the latest asset protection, business structuring, and tax techniques.