Tom's Blog

Corey listened to our teleseminar with Doug Lodmell and asks the following question:

Q: Tom, Thanks for the great information on Asset protection. It seems the more I read though the more confused I become. In the Rich Dad series Garrett Sutton talks about Nevada and Wyoming LLC's and Nevada Asset Protection trusts being great for asset protection. Douglas Lodmell listed these as poor when it comes to asset protection in his teleseminar. I guess the question is who is correct or are they both correct and I am misunderstanding the presentation?

A: As Doug pointed out in his teleseminar last week, there are several levels of asset protection. Doug showed a scale of poor, good, better and best types of asset protection. I don't think there is any question that the offshore asset protection Doug advises is the ultimate in asset protection. But that doesn't mean that you don't want to do at least some of the other pieces as well. As Doug suggested, most of your investments and business interests you want to be held in an LLC. This is what Garrett is talking about. This is good asset protection and is the minimum anyone should do.

The next level beyond LLC's would be a domestic asset protection trust (DAPT). I don't believe Doug addressed these during his presentation. Here is how the DAPT works. In most states, a self-settled trust (i.e., one in which the person who puts the assets into the trust is also the beneficiary) does not protect you against lawsuits. However, a few states have enacted DAPT statutes that do protect you in a self-settled trust. Wyoming, Alaska, Nevada and Utah are a few of the states with these laws in place.

So why go to the trouble and expense of an offshore asset protection trust when you can just form a DAPT? There are two reasons I can think of. First, these trusts have not been tested in the courts. So, we don't really know what will happen when they are tested. More importantly, however, is the situation where you don't live in one of these states or your assets are located in a state other than the state in which your trust was formed. When you are sued, which state's law is going to apply? If I were a plaintiff, I would sue in the state where the property is owned if it is not a DAPT state. Will a court in a state without the DAPT statute protect you? This is a big unknown.

What we do know is that offshore APT's have been tested for over 20 years and have proven to work. Hopefully there will come a day when all of the states have DAPT statutes and we don't have to go offshore. In the meantime, though, if you want maximum asset protection, especially if you own property or live in a non-DAPT state, you should consider an offshore APT as suggested by Douglass Lodmell.

Let me know if you have any other questions about this. Hope it helps.

Warmest regards,

Tom