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Wealthy & Wise: How to Protect Your Assets in a Litigious World

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June 30, 2023
Author: NCH

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About the Video: How to Protect Your Assets in a Litigious World

Using legal entities to protect your assets is of paramount importance in safeguarding your financial security and minimizing personal liability. Legal entities, such as corporations, limited liability companies (LLCs), or trusts, provide a crucial layer of separation between your personal assets and your business or investment activities. By structuring your affairs through these entities, you create a distinct legal identity for your assets, shielding them from potential risks and liabilities. This separation ensures that if an unfortunate event occurs, such as a lawsuit or bankruptcy, your personal assets remain insulated and protected. Additionally, legal entities offer tax benefits and flexibility in estate planning, allowing you to optimize your financial position and ensure a smooth transfer of assets to future generations. Overall, utilizing legal entities is a prudent strategy to mitigate risk, preserve wealth, and achieve long-term financial stability.

Prefer to read? A full transcript is provided below.

Cort:

Hello and welcome to another edition of Wealthy and Wise. I’m your host, Cort Christie. And today we’re talking about how to avoid the pitfalls or risks of litigation out there in our society. Everywhere you turn, there’s a potential lawsuit. And in fact, there are millions of attorneys in this country that all have to pay their bills and are very happy at filing lawsuits. And I brought with us an expert today to help each and every one of us figure out how to avoid lawsuits and litigation. Kurt Harris of the Harris Law Group. Welcome, Kurt.

Kurt:

Thank you. Great to be here.

Cort:

Absolutely. Why is it, Kurt, that so many people just think of dealing with attorneys and just cringe?

Kurt:

Yeah, and I think it’s for better or worse, I guess sometimes you feel like, you know, they can be your best friend when you’re in a real pinch, but other times you feel like they’re just all an ambulance chasers and they’re just after that quick buck. And there seems to be this pervasive type of feeling out there in society with all the advertising and some of the things that we’re hit with that those attorneys are just out there just waiting for that opportunity to strike.

Cort:

Yeah. And then the advertisements, I mean, really, the advertisements are kind of like, hey, you know, sue this person, go after this one if you been hurt, if you fell and you know, we’re here, we are in Nevada. I’ve seen these signs that are up. You know, if you got hurt in a casino, if you, you know, have had this problem or that problem, call this law firm or that law firm. The advertising is so pervasive, it’s just like asking people to sue each other.

Kurt:

And it makes it really tough in society because it seems like if there is an accident out there, that it presupposes that someone should get paid, you know, and then not everybody is hurt or injured or one thing or another and doesn’t really require compensation. But it just seems like that if there is an accident, a fender bender or whatever, it happens to be, that automatically there’s going to be a payment involved in that. And many times the insurance companies feed into that as well because they’re all too eager to write checks sometimes just to make it go away for nuisance lawsuits that are potential out there.

Cort:

It’s interesting as you think of, you know, the explosion of lawsuits and litigation in the last few decades, is it, would you say it’s growing or is it curbing? Are there any efforts to slow down the amount of lawsuits or anything that, you know, been developed as far as laws to kind of protect consumers from, you know, more lawsuits?

Kurt:

Yeah, without a doubt. It seems like it’s growing. And without a doubt, it seems like with more and more legislative sessions, there are more and more laws. And those laws are meant either to open up the door for additional litigation or to curb some litigation. But for the most part, most of them provide a new avenue for more litigation and more litigation.

Cort:

Yeah, it doesn’t seem to be ending.

Kurt:

No, and it seems to be a moneymaker sometimes for some states, as well, that they’re willing to sue companies just because they’re trying to make a buck off them. And so even the state will come in and will use one of their state laws, is pretty remote for someone who happens to be on the Internet or something like that and will go after them.

Cort:

Interesting. Well, let’s talk about how to protect yourself from all this crazy litigation lawsuits that are out there. So, you know, our listeners got a house, they’ve got a car, maybe they’ve got a rental property or a small business that they have. They’ve got some assets that they’ve developed a retirement plan. You know, what can they do? What are some of the top things you want them to understand as far as ways that they can lower their lawsuit risk and then ways to protect themselves from lawsuits as well?

Kurt:

I think one of the ways that we like to develop, I guess, is to allow people to put things of their property in a trust. It isn’t so much that the trust maybe might be revocable or may not be an asset protection vehicle, but by putting it in the name of a trust, not your name. Now, that might deflect some of those that are out there looking up on public record to see if they can find a certain person and see if they have assets that would be listed on public record. Just that mere diffusion or the ability to put up a smokescreen to shield some of our assets might help you, in the case of somebody who’s just kind of looking around, being opportunistic and looking to see if somebody owns more than one property or whatever in a certain jurisdiction.

Cort:

And that’s just a great way to lower your exposure. You know, I had a friend recently reach out to me and say, hey, I’m buying a piece of real estate, but I really don’t want the world to know that I own this piece of real estate. And I’m like, I totally understand exactly why you want to do this. It’s like you want to keep your name off the public record. You don’t want somebody to just be able to go into the county and do a search and see what you own. And so, you know, you and your team put a great trust together for this individual where their name is no longer listed. But, you know, if anybody needs to get a hold of the property owner, there is a way to get a hold of the property owner. But you can’t search the county database and have that person’s name show up. And it’s a great small, easy tool to still lower your profile. It’s like the less that you appear to own, the less likely you’re going to attract lawsuits.

Kurt:

It really is quite simple and you’d be surprised how many attorneys go immediately to the assessor’s side to see if somebody owns property in that county where they are currently residing. Another thing we always talk about is my personal residence. What about my personal residence? And for most people it is their largest asset, it is their largest investment they have and for the most part, as long as it’s well insured by putting it in a revocable living trust, we think that’s probably the best means and mechanism of protecting that or shielding that. And then you always have the ability to homestead your home. You need to be aware of what the bankruptcy laws are, what the deduction is, or how much you can protect and preserve in bankruptcy. But generally, they won’t go after somebody’s home.

Cort:

That’s interesting. In states like Nevada, which is very unique, we have but is it just over a half a million dollars of homestead protection of the equity of the value of our home? Now, compare that I think California might be like $100,000 or even less. It’s very little.

Kurt:

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Yeah, a real head scratcher. New Jersey’s like $15,000. Like, what is that? You know who owns a shack in New Jersey for $15,000? So, I don’t really understand that. I think the laws are kind of outdated across the nation. But in certain Western states, those are pretty high. Florida, it’s unlimited.

Cort:

Yeah.

Kurt:

So, you wonder why so many retirees are going to Florida? There it is right there. The homestead exemption is unlimited, so any amount of millions in a home can be protected and preserved in bankruptcy in Florida.

Cort:

And that’s why we see so many really wealthy people moved to Florida, buy a giant estate or even Texas, where you buy a ranch and protect the entire value of the ranch permanently. Well, let’s go back to, you know, for the people that aren’t living in Florida or aren’t living in Texas, what other things can they do to protect wealth, lower exposure or just minimize lawsuit risk?

Kurt:

When they get to a certain amount maybe in their wealth, they may want to consider an irrevocable trust or maybe a land trust that would be revocable to put certain other real properties into, to also take that out of their name. An irrevocable trust is always a really good idea, a great place to put property that you intend to pass on to the next generation. And once that’s in that property for the most part, you have to wait a certain amount of time on the statute of limitations, depending upon your jurisdiction from two years, to three years or so. But once the property is in an irrevocable trust, it can’t be reached by a creditor in the case of a lawsuit or something like that. It can be very helpful to people to have something in an irrevocable where they have shielded their assets. In addition to that we really like LLCs. The use of those can be very effective in warding off creditor claims. That is oftentimes because you have more than one individual who’s part of that LLC and more than one member. And so, it’s difficult to detect or discern who owns what within the LLC, and those members can make certain arrangements within their LLC as to what the ownership is and how that is comprised. In addition to that, you have the charging order protection with an LLC that if they are, in some states, for instance Nevada, where we like the best charging order, where the only way that your creditor can get at the proceeds of that LLC is if it is profitable and they need to be there on the day that the profits are out. But otherwise they can’t seize the LLC, they can’t take it as an asset and they can’t put a lien against the proceeds. They have to be there when the proceeds are paid out.

Cort:

And now Nevada has some unique laws with respect to that. Is that right?

Kurt:

Super unique because it allows charging order protection on a single member LLC. So, I can create my own vehicle and I can create when my profits are paid. And only then could a debtor come there and try to intercept those profit payments.

Cort:

So, if you never made any payments, let’s say you had a lawsuit against you and then God forbid somebody won and had a judgment against you. You’re saying that you can literally run a business, not distribute the profits. Therefore no one’s going to get access to that money.

Kurt:

Charging order protection comes into play and they can get a charging order, as against the profits only when the profits are paid only. And so, it kind of in perpetuity someone could continue to run their LLC, but not necessarily have to pay out any profits. They can still cover expenses and other things and not really be subject to that charging order.

Cort:

Interesting. You also mentioned an irrevocable trust besides an LLC. Nevada’s got some really cool laws with its LLC protections that are so important for people concerned about any kind of lawsuits. And you don’t have to live in Nevada to take advantage of a Nevada LLC. You can operate it in any of the states where you might be living and listening to this program today. But then let’s talk about the irrevocable trust. There are some unique laws in Nevada with irrevocable trusts as well. Is that not right?

Kurt:

Very unique with regard to a domestic asset protection trust or DAPT or an NAPT as they’re sometimes referred to, Nevada Asset Protection Trusts. Those are very unique, irrevocable trusts where you can be the beneficiary of your own trust. You can’t necessarily be the only trustee, but you can be a trustee on that trust. And you can name yourself also as a beneficiary of that trust while still having an irrevocable nature of the trust. You have to follow certain rules and regulations within the trust. And it’s very important to note that there’s a two year statute of limitations on property that’s placed into that trust, meaning that your creditors can’t go after any of those assets after two years of residing within the trust. And there it’s a very effective means of preserving your assets for future generations as well as for yourself.

Cort:

So, Nevada has actually sort of built itself as this sort of asset protection state protecting people from lawsuits and litigation and creditors and potential pitfalls that can occur in business and life.

Kurt:

It really has. I mean, as far as most jurisdictions go, there really aren’t any that rival Nevada. They’re very close, some of them. But Nevada seems to have, be at the forefront or at least seems to be very focused on that, in addition to having courts for the most part that are pretty friendly to corporations and are pretty friendly to asset protection vehicles.

Cort:

Interesting. Well, this has been great. It’s good Kurt for everybody to, you know, hear more about ways that they can protect themselves. Some of the vehicles like trusts and simple holding trusts, irrevocable trusts, to revocable living trust to, you know, LLCs and all the different tools that are available for people that are trying to protect themselves. I think the most fundamental thing for everybody listening is if you’re a sole proprietor, if you’re an independent contractor, if you own real estate and you do not have these things in an LLC and ideally in a Nevada LLC, for the extra layer of asset protection that you get, you need to change your practices right now, today. And I want every one of you listening to call us at NCH and find out more information about how that can benefit you and your circumstances. It’s a free consultation. We’ve got experts that are available and we are operating from 8 to 5 Monday through Friday Pacific Time. We’re based in Las Vegas, Nevada. We’re here to work with you, help you through whatever complex situation or whatever basic situation that you have. If you just simply want to take advantage of a Nevada, LLC, we’re here to help you. So, Kurt, thanks for shining a light on this. And obviously people understand how they can protect themselves better.

Kurt:

Thank you very much.

Cort:

Absolutely. And for those of you that tuned in, thank you for watching Wealthy and Wise once again, I’m your host, Cort Christie. And please like and subscribe our channel so we can continue to spread the news. Thank you!

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.

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