How to Protect What You Own
If you own nothing then nothing can be taken from you. Legally owning nothing is the strategy discussed in important books like Trump University Asset Protection 101 by attorney J.J. Childers (who is affiliated with Donald Trump’s business education network). The core principle of all asset protection planning is to separate assets from risk.
I’ve helped many clients achieve the degree of asset protection they want using trusts, limited partnerships, LLC’s and corporations. You can spend a lifetime working and earning money, patiently saving and investing, taking risks, and sweating your way to a better life. And in one moment you can lose it all.
The tort system in the United States is broken. A cup of coffee that is too hot can cost your business a small fortune (The McDonald’s – Stella Liebeck case). A teenaged employee who doesn’t follow instructions and discriminates against a customer can also cost a fortune. See:
Most people simplistically assume that insurance will protect them. But what if a runaway jury awards more than your business insurance will cover? Who pays the difference? YOU DO.
There are three simple rules of asset protection:
You can’t lose what you legally don’t own.
Doing nothing may be the most expensive decision you ever made.
The Law of Large Numbers: the bigger your business the more risk you are exposed to. More customers = more risk. More square footage used by the business = more risk. More sales = more risk. More employees = more risk.
As these numbers get bigger and bigger the Law of Large Numbers means that sooner or later you will be dealing with a situation you didn’t expect and may not be prepared for.
Think ahead! Plan and prepare for risk before it’s too late.
How to Protect Who You Are
People talk. And people love to spread gossip and rumors. Business owners and others with significant assets tend to be uncomfortable when their personal finances are the talk of the town. There is one way to avoid this situation: an invisible asset can’t be talked about; neither can an invisible person.
You don’t need to be a hermit like the author of Catcher in the Rye (J.D. Salinger) to enjoy privacy in your financial affairs. But you do need to be smart and structure your assets in such a way that they cannot be easily linked to you.
It may sound absurd that the best way to protect assets (discussed above) is to legally own nothing. But it’s true. And it may sound even more absurd and paradoxical that the best way to enjoy financial privacy is to legally not exist (in financial terms anyway.) But this also is true. Perhaps these distortions are a reflection of how sick our society has become. But we must deal with the world as it is, and not as we might wish it to be.
Individuals who are known to have wealth and high income are targets. Such people find themselves at the center of a bull’s eye which can make life unbearable. The best way to protect yourself from being a prisoner of your own wealth is to separate yourself from it as much as possible. This requires financial anonymity where your assets and income exist independently and separately from your personal life. This frees you from subservience to your money and re-establishes the correct and most useful relationship between people and their money: People first, money second.
I’ve helped high income, high net worth clients achieve the degree of financial privacy they desired. This requires creativity, flexibility, and the very highest quality thinking. In this area as in so many others, doing nothing may be the most expensive and painful action of all.
A Word to the Wise About the IRS
I’ve read about people who intentionally want to hide assets and/or income from the IRS. This is foolish. You can’t hide from the IRS nor should you try. Some deluded people have attempted to hide assets in offshore accounts. This is now one of the major enforcement initiatives of the IRS. See:
The truth is that the IRS is required by law to protect your privacy and the confidentiality of your financial information. Strangers and neighbors, on the other hand, are not bound by these rules. Few people enjoy having details of their finances and assets be the talk of the town. But privacy takes work.
Pay your legal minimum tax and the fact is that the IRS will be your confidante. As long as you are honest and pay your tax bill on time you will have absolutely nothing to fear from the IRS. They won’t bother you. They won’t sell your confidential information to third parties for profit. They won’t leak your sensitive personal information to the press. And they won’t chase you to death for a cashable photo, unlike what happened to Princess Diana.
There are many issues and people to be concerned about when it comes to protecting your financial privacy. The IRS is not one of them.
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