Without An Anonymous Trust, Your LLC (And Investments) May Be At Risk

When it comes to protecting your property, you should build a castle, not a fence. This is where an asset protection plan comes into play. Think of an LLC's protection as being on par with a fence. It offers you decent protection, but you could do better.

How? By getting an Anonymous Trust. When you compare a trust to an LLC, it's like comparing a castle to a fence. A trust offers superior asset protection you can't get from an LLC alone.

Protecting your assets is about building legal walls. When you get a trust, you're putting up high walls to defend against an attacking litigation attorney. A trust isolates your assets so even if an attorney files and wins a lawsuit against you or your LLC, they can’t get at the prize assets. Poor guys, all that work for nothing!

Why An LLC Doesn't Completely Protect You

Are you a real estate investor with one or more properties held in an LLC? If so, listen up: There are many tricky ways litigators are able to break into an LLC and get access to all your assets—even when the lawsuit pertains to a single property. The LLC will protect the properties from suits against you individually, but a lawsuit relating to the sale or lease of property will go against the owner (the LLC).

In a landlord/tenant dispute or a dispute relating to the sale of a property, the LLC is liable as the owner. If the opposing party is successful in the lawsuit, they will be able to collect on their judgment against the assets of the LLC (as in ALL of your properties). They will be able to foreclose and auction off your properties at a discount until they have collected enough money to satisfy their judgment.

Poof. There went your years of hard work, into the pocket of an attorney.

Anonymous Trusts Stop Lawsuits Dead

The more walls you have, the harder it is for the other side to recover your hard-earned assets and the more likely it is that they will not even bother filing suit. Lawsuits are a three legged stool, and a trust destroys one of the legs, which causes the lawsuit to crumble. The three stool legs which support a successful lawsuit are:

In layman's terms it translates respectively to:

  1. The law recognizes liability either by common law or statute,
  2. The facts show that the party suffered money damages because of the defendant's conduct, and
  3. Assuming that previous two are true, there are assets which we can take from the defendant to satisfy the judgement.

A Trust Makes Attorneys Think Twice Before Suing You

An attorney won’t file a lawsuit without all three legs being in place. Using an Anonymous Trust/LLC combination cripples litigation because it makes the pool of assets for recovery, the third leg of our stool, unattractive. Ten properties held in an LLC makes an attorney drool like a hungry dog. That’s a lot of assets, and likely some equity an attorney can get a hold of.

A single property held in trust doesn’t even get an attorney to the keyboard to type out a petition to file suit. There just isn’t enough equity to recover against.

A Trust Is The Castle Protecting Your LLC's Assets

Let's say you have all your property held in an LLC and want to transfer each of those properties into individual trusts.

The first step toward developing your asset protection plan is to establish an irrevocable trust. You can hold property in the name of this trust instead of your LLC or personal name. Now that the trust owns the property, you or your LLC are merely beneficiaries. This entitles you to the income from the property without exposing you to liability.

In a dispute regarding the property, the opposing party will only be able to collect against the asset of the trust, the trust property, which hopefully has limited equity. Why do I hope that the trust property has limited equity? The lawsuit that is filed against the trust is limited to recovery against the trust property.

If the mortgage on the property is close to the value of the property, then there isn’t enough equity in the property to justify a lawsuit. Remember, the litigation attorney only gets paid after he auctions off the property and pays off all the liens including the mortgage. And it just so happens that there are several ways to hide the equity in your property.

An Auction Can Work In Your Favor

The fees for the auction and the costs in litigation to get it to auction are also subtracted from the equity. In the end, there is hopefully little hope that an attorney and his or her client will make any profit.  Same goes for the client, who also pays large litigation fees. If neither the attorney nor the client can make money, they won’t file suit.

The Asset Protection Basics: Anonymous Structures & The Shell Company

Asset protection is the art of eliminating your liability and protecting your assets from potential lawsuits. I say potential because once you have a solid plan, nobody will bother suing you. Even if they think they can win. And before any internet ethicists jump down my throat, understand that this is all done legally.
Also, I realize you may already have an LLC. If you think that's all you need to protect yourself, check out our previous piece on why an LLC alone isn't an asset protection plan. Anyway, let's get down to business. Asset protection involves two main things.

Anonymous Structures and Separation of Assets

When it comes to the asset protection basics, anonymity is a cornerstone. We make you anonymous by separating your assets from your operations. This way if your operations become liable, your assets will still be safe.
So how do we separate your assets? By putting them all in one shell company. This particular company doesn't interact with anybody. It doesn't do anything and it has zero contact with the outside world. It's held using anonymous names inside of Anonymous Trusts and anonymous structures. Multiple layers of anonymity protects you and your property from litigation.
Nobody except you will know who owns these structures. Which means nobody will be able to come after those assets in a lawsuit. But of course, we can't talk about the asset protection basics without mentioning the shell company.

Operating Company As a Shell Company

The shell company owns no assets but it conducts all of the business. It's your face to the world. It's the face (company) we want people to sue if there's ever a legal dispute. Yes, you read that correctly. We actually want this to be the target. Think of it as a legal decoy.
In fact, we want to structure our contracts to say that "if we have a problem you can only sue this company." The company we'd list would be your shell company. It sounds simple, but doing it will eliminate virtually all of your liability.
When it comes time to set up your asset protection plan, always think:  assets on one hand; complete anonymity, separation and operations on the other.

Asset Protection Kills Lawsuits Before They Happen

A formidable asset protection plan will always include anonymity and a shell company. Most of the time, this will be an LLC or a Series LLC. I hope you enjoyed my short blog post and video about the asset protection basics!
Are you interested in learning more about how these plans can protect you from lawsuits?  Contact us today to take your first steps towards becoming litigation-proof.

How To Hide Ownership Of A Company: 3 Simple Steps

The main reason you might want to know how to hide ownership of a company is to prevent lawsuits.

With that being said, the purpose of this article is to introduce the concept of anonymity, and one of the most effective tools for maintaining your anonymity is the Anonymous Trust. When set up correctly, the anonymous trust can be extremely effective at hiding ownership of your company—which in turn prevents you from being sued.

Here are three simple steps you can follow to hide company ownership and prevent lawsuits.

Step #1: Form an Anonymous Trust

The Series LLC reduces your liability exposure, which effectively limits the potential damage a lawsuit can do to you. What it doesn't do is stop the lawsuit from happening in the first place. On the other hand, an anonymous trust can. If you truly want to make your company litigation proof and protect your assets, you need an anonymous land trust.

The probability of a lawsuit happening is based on three separate components: legal, factual, and financial.  An anonymous trust will attack each of those motivating factors. What this does is reduce the chance of a lawsuit happening in the first place.

Step #2: List Your Anonymous Trust as a Member of Your LLC

Yes, believe it or not, you can do that, at least in America. (You have several options when it comes to structuring your business assets.) Anyway, this tactic targets the financial component of a lawsuit.


Because lawsuits only happen when a plaintiff believes they have a reasonable case for seizing assets to cover damages. If there's nothing they think they can seize from you, they won't sue you. 

The anonymous trust structure enables you to hide company ownership by listing your company as a member in your LLC’s Articles of Incorporation. Another advantage of an anonymous trust is that you don't have to file it with the state. This means the people who want to sue you won’t be able to access your ownership information in the public records.

There will be nothing to associate the assets with your name, shielding you from potential legal action.

Note that you can use this strategy with any type of LLC, including the Series LLC.

Step #3: Allow Uncertainty to Work Its Magic

People sue you because they want your money. Most of the time the people suing you have little to no money in the first place. And if they don't have enough money they can't pay a lawyer to sue you.

People usually get around this obstacle by offering their lawyers part of the settlement. This means it's up to the lawyer whether or not you get sued.

If a lawyer is uncertain about whether you own assets worth anything, they won't waste their time trying to sue you. After your anonymous trust is in place it will be next to impossible for someone to determine what you own. 

No lawyer is going to spend months or years trying to figure out what you own, period. I would know, I'm an attorney myself.

I hope you enjoyed this article. If you want to hide company ownership, make sure you do it right. To learn more about setting up an anonymous trust, visit our Land Trust hub or take our investor's quiz and find out if engaging with us is a good option for you.

Litigation Proof? How the Right Business Structure Can Save Your Hide

Making your company litigation-proof is like trying to make a house tornado-proof. There's a lot you can do, but there's always going to be some vulnerability there.

Business owners and investors might as well think of lawsuits as a force of nature. You can't predict them, and you can barely protect yourself from one. This is even more true once the lawsuit has been filed. These life-ruining events pick up momentum from the beginning, just like a tornado.

The reality is you will be sued as long as the conditions are right. The only thing preventing a lawsuit is the correct set of circumstances.

Don’t assume probability will save you. One in four Americans are sued in their lifetimes. Business owners and investors are even more likely than a regular Joe to be sued. It could easily happen to you!

Remember, lawsuits are like nature: they're inevitable. It's a question of when, not if, they will happen or not.

Litigation Proof: Tornado

Why Do Lawsuits Happen?

There are three conditions that make a lawsuit extremely likely. If all three are active at the same time, then a lawsuit is almost guaranteed to happen.

How To Make Your Company Litigation Proof

While there is no way to make your company immune to a lawsuit, you can definitely lower the probability of one taking place. A good asset protection plan addresses each of the conditions/steps I mentioned above. The goal is to stop, prevent, or make it extremely difficult for a plaintiff's legal team to go through each step.

So how do you make it difficult for them to go through each step? The solution is simple.

Spread out your company assets with a series LLC.

Limited Liability Companies (LLCs) prevent someone from suing you personally. You can learn how to start an LLC here. However, storing all your assets in one place is still a risky strategy. What you want to do is spread your holdings across multiple business entities. This will reduce your exposure and make it difficult for someone to determine your net worth.


How To Make Your Assets Judgment Proof In A Lawsuit

If you’re a real estate investor, you are at risk from lawsuits whether you know it or not. You may already know the real estate industry is a breeding ground for lawsuits. Now add in the fact that you live in a country where people can sue you for nearly anything.

As a real estate investor, you’re at risk of losing everything: equity, assets, and even your reputation. This is especially true if you hold assets in your personal name.

Did you know that a lawsuit is ranked one of the top three things that people find the most distressing events in their life? Lawsuits rival only with divorce and bankruptcy. The good news is, I can make your risk disappear. This means you’ll be untouchable when it comes to lawsuits.

How, you ask? First there’s something I’d like you to know: the truth about how the wealthy protect their assets.

The Truth About Protecting Your Assets From Lawsuits

The truth is the super rich don’t own assets. They only control them. They do this through a network of LLCs and trusts. These networks protect their assets and allow them to hide them from anybody looking to come after them. You can learn more about how LLCs and trusts protect you from my previous article on the subject.

Imagine the disappointment of anybody looking to sue you when they find out you don’t own anything. Well, at least it will look that way on paper. In reality, you could be worth millions and only look like you’re lower middle class. But the person suing you won't know that.

Who would sue somebody who appears to own nothing? That’d be a waste of time. Remember, the average person doesn’t have the money to pay legal fees upfront. What most people do is split the settlement, assuming they win.

Make Your Assets Judgment-Proof Now Before It’s Too Late

No attorney is going to come after you in a lawsuit if they think they have nothing to gain, pure and simple. But you better believe they’ll see dollar signs when your name starts showing up in  paperwork.

My name is Scott Smith. I’m a real estate investor & an asset protection attorney. I know both sides of the game because I’ve played on both. Give me a call today, and together, we’ll make your assets judgment-proof!