Insider Secrets Podcast Episode #22
Guest: Brian Bradley
Subscribe to Multi-Family Insider Secrets on your favorite podcast app:
Brian T. Bradley, Esq. is the Senior Managing Partner at Bradley Legal Corp and is a leading educator and nationally recognized asset protection attorney for high-risk professionals, Entrepreneurs, real estate investors, and ultra-high net worth families. Collectively they are protecting over 5 Billion worth of assets. Brian’s goal is to give you “peace of mind” knowing your assets are safe and they make it difficult for predatory lawyers to target vulnerable people.
Brian was selected to the Best Attorneys of America List 2020, Lawyers of Distinction List 3 years in a row 2018 through 2020, Super Lawyers Rising Star List 2021 and 2015, and nominated to America’s Top 100 High Stake Litigators List, and the Top 100 in Real Estate.
Brian also writes and teaches on Advanced Estate and Strategic planning, and is a featured speaker at numerous Investment Summits, Real Estate, Cashflow, Finance, and Life Coaching shows.
[00:00:00] Kristen: Welcome to this week’s edition of Insider Secrets. The show that turns multifamily investing into reality. Each show we interview guests who are seasoned professionals, actively closing and managing real estate deals. Your host Mike Morawskihas more than 30 years of multifamily, real estate investing and property management experience
Mike is the founder of My Core Intentions. And he’s been involved in over $285 million of transactions. Focuses on helping you create short term cashflow and long-term wealth. Here’s your host, Mike.
Mike: Hey, good afternoon, everybody. It’s Mike, your host of Insider Secrets. And we all know that Insider Secrets is brought to you by My Core Intentions. And so have you been thinking lately what your [00:01:00] why is and what your intentions are? Let me ask you a question. Did you get up this morning? Did you spend five or 10 minutes just thinking through what you were going to accomplish today and why that was important?
When we don’t start out with some intentionality, we have a tendency to get off track and things, not to be clear in our lives. So listen, My Core Intentions invests in our client’s future through educational platforms, training platforms in three different coaching programs.
We want to empower our clients to execute sound real estate investing principles and property management skills. And most importantly, while living a balanced life. If you’re looking for some direction, if you’re looking for some guidance and some help creating some goals and your why, give us a call. We’ll do a free coaching call with you and help see if we can’t maybe get you some direction.
So let’s get started with our show today. I’m excited about today. I’m welcomed by my friend and asset protection attorney Brian [00:02:00] Bradley. Brian’s an asset protection attorney for the real estate investor and high net worth high risk professionals, such as medical professionals, business owners, high net worth families.
He specializes in higher level protection for his clients. This level of protection really provides a security from threats greater than an LLC we typically provide. Brian was selected to the best attorney of America list in 2020. Lawyers of distinction list three years in a row. And super lawyers rising star list, the top 100 stake litigator list.
And Brian is also a frequent guest on many radio shows and podcast shows. It’s a pretty impressive bio if you ask me. So here’s what I’d like to do is introduce Brian, have him say hello, but Brian, before you do that, what I want you to do is I want you to just say in one word, that would sum you up as an investor, as an attorney, [00:03:00] personally, to our listeners in one word.
Brian: Banking. Yeah. I like passive income and investing, but my path of it is like a bank. I like notes and lending private money and pass things off risk and liability. And it even goes into how it’s structured in my law firm, to systemize things, to where it frees up a lot of my time and put in money into other buckets to invest. So I like the principles of banking.
Mike: Okay. Interesting. So let me ask Brian, can you give us some backstory about yourself? How did you get involved in law and especially in asset protection law?
Brian: Yeah. I got into asset protection from the litigation and trial side of law and having clients just being Sue and their lives turned completely upside down.
And there wasn’t much that they were able to do about it. A lot had a false sense of security thinking, that they had a revocable living trust and that would protect them, which they’re not designed to or that they can just solely rely on their insurance, which when you get into big lawsuits, [00:04:00] their job is to separate from you and create legal separation.
And they were just showing up. Every time they came in. And I just wanted to be proactive and start getting ahead of this problem and help people and investors and high-risk professionals out and, just by being in the legal system and in trial, I just made the observation and through study that the legal system is just broken and it’s not about justice any longer, we’re, I call a Sue happy Nirvana.
With over 40 million lawsuits that are filed every year in the U S and I think 99% of all the lawsuits and the war of the world are filed in the U S and so litigation over the last 30, 40 years has just become a billion with a B dollar industry. And so what we do is provide peace of mind for clients.
That’s essentially what a client calls in and says, Hey, I’m interested in asset protection. They’re really calling in saying, Hey, I want some peace of mind. We keep the overall goal of, lifestyle prevention changed in the way predators view you as the overall goal. And it goes to the same, like you can’t stop yourself from being sued and but what you do have control [00:05:00] over is how collectible you are.
And so what my firm specifically does is work with, these higher risk higher. Worth clients high-risk professionals, that turned that 1 million net worth mark. And, it comes with a little bit higher startup cost because the needs and visibility are a lot more generally around $29,000 for the startup.
And within our network, we protected collectively up to, over 4 billion worth of assets in the systems we create. I think
Mike: one of the things that real estate investors, especially new real estate investors, and a lot of our listeners on this show are really newer, real estate investors.
I think they, they buy into what I perceive in some of the conversations I’ve had is a lie around that the LLC is the only protection you need that as long as you have an LLC, that’s the best. Form of protection. That’s the best corporation that you can have when you’re structuring your business.
And, is that true? Or, what types of things would you talk around about that a little bit?
Brian: Yeah, that’s a great [00:06:00] misconception. And I think if it was into the trap of the law firms, the salesman law. They’re just trying to cast a big net, like other businesses and use the most simplified form of one structure that they can use, that they can, everybody can fit into it.
There’s no silver bullet. When it comes into asset protection, it needs to be a single individualized basis in a structured evaluation. Like you’re different. Your listener is different than you. You’re distributing from your listeners. Your neighbors or assets are going to be different. Your finances are going to be different.
Our job is to do a whole overview structure of who you are, what your liability is, how you own it, how much equity you have, what buckets you’re investing in, and then mix and match the tool. And depending on what your situation is, will depend on what structures we need to create. An LLC is the base level.
Entry-level formation is good, but they don’t hide the fact LLC. What’s the first letter first word. Like they tell you straight [00:07:00] in the name and title of what it is. This is limited personal liability and that veil can be easily pierced. So there’s no such thing as just stick everything up into one, LLC.
And you’re perfectly fine. And if you have different assets, you want to set those up into different LLCs and start layering your protection level. So I use LLC, so don’t get me wrong, know, like you need to have an LLC, but that’s your base level when you’re starting out, as you grow you scale, then you’ll meet probably another LLC, then you’ll need a management company.
And then, you’re just layering. Then you put in your last layer, an asset protection trust.
Mike: I have a lot of investors that will ask me, Hey, if I have an LLC how much real estate can I put in that, LLC? Is there a dollar amount or is there a number of properties amount that you should put into an LLC before opening it up?
Brian: Yeah. So a good question. A general rule of thumb, we say don’t put over a hundred million, not a hundred, 1 million worth of equity into it [00:08:00] and there, and if you have assets in different states, you separate them out. So for example, if you have one asset in Florida and one asset in New Mexico, you’re going to have one LLC in New Mexico, and you’re going to have one LLC in Florida.
And the reason is because those assets that’s where that lawsuit is going to come. So you’re not going to be transporting state laws from different states. So wherever you’re going to get sued, that’s going to be the jurisdiction of that lawsuit that state’s laws are going to apply that damage laws, the tort laws of personal injury laws, aren’t going to apply in those states.
And the optics of it looked better. If I have a Wyoming, LLC, and I dump all of my assets into a Wyoming, LLC, the optics from a judge and a jury are going to look at that and there it’s not going to pass the smell test. And so what you want is the optics to look good, but also understand where the law suits coming from.
So rule of thumb, no more than 1 million worth of equity per LLC. And that’s just because of one asset blows up. You don’t want it to affect the rest of the assets in the LLC. And [00:09:00] then depending on what state you’re in, you start creating more LLC per state that the S. Okay.
Mike: Interesting. You hear a lot of people talk about a Delaware, LLC, and now you just mentioned Wyoming.
Is it, are those the same type of rules in, in Delaware and Wyoming or are they different?
Brian: There are different. So it comes down to what you’re talking about is like charging orders. And people really have a lot of confusion about, these and LLCs and what states to set them up in. So you hear like Delaware, Wyoming, Texas, Nevada Arizona.
What it really comes down to, what are you holding? Like you can’t just start jurisdiction shopping without knowing what you’re holding. So let’s say, for example, is California real estate that you’re holding and you set up a Wyoming LLC because somebody on the internet or your CPA told you it was better.
And then you go and you bring it. You’re bringing it to California because you live in California. And you hold a key piece of real estate in California. So now you’re paying California franchise tax. And what you’ve also done is, you’ve converted [00:10:00] your Wyoming, LLC to a California LLC, because you’re doing business in the state of California.
And not only are you going to pay that franchise tax, but if you ever have a liability issue in California, like you’re being sued. The judge in California, isn’t going to apply the law of Wyoming. If they’re going to apply California law, for the reasons we discussed, that’s where the assets at, not Wyoming law, a judge in California, or any other state doesn’t care that your LLC is a Wyoming registered LLC.
You know what they care about. Is that it’s doing business in California with a California asset or whatever other state at sin, that’s the state, the assets in that’s the state to injury. And the damages occurred in, is going to be that state’s laws that are going to be applied. So for, like I said assets, that are real estate.
I recommend using the state that the real estate is located in because you’re not gaining anything by using another state. You’re just doubling your maintenance costs to manage that LLC. So now you also have to maintain, sorry about that. [00:11:00] That’s all right. So now you also have to maintain the LLC in two states.
So we’re just keep it simple. And then you add the layers. The next layer you would add is that a limited partnership and met as a management company. That would be a disregarded entity. That’s going to be the next layer of protection. And then all those K ones of the LLC would just flow straight through that limited partnership.
And it’s just one tax filing.
Mike: Okay. All right. So it’s easier on the tax piece of it
Brian: by doing it that way. Exactly. And then, layering, like if you’re from the cold weather, like I am, like you learn to dress in layers, base layer, mid layer, outer shell. Same thing with your asset protection system.
You want a base layer, your LLC, a mid-layer limited partnership, and then you’re out or cold weather is you’re going to be your bridge trust or your asset protection trust and all this makes it more flexible for you.
Mike: So one of the things that you hear a lot is Hey, go open [00:12:00] up a Delaware, LLC, because that’s going to be good protection for you.
But what I’m hearing you say is I could go open up a Delaware, LLC. But if I own real estate in Texas, I shouldn’t put that real estate. I own in Texas in that Delaware, LLC, I should open up another LLC in Texas. And baby, that could be owned by the Delaware, LLC, or how would that work?
Brian: So I wouldn’t have the LLC on the LLC.
Because as you’re staging it, I would stage it out. Your base foundation will be the Texas LLC owning that Texas property. Okay. The next one would be a limited partner, not an LLC because limited partners have dual ownership classes, a general partner and a minority partner. And so what you would do is have the general partnership share of a limited part of the LLC.
Oh, and all those LLCs. And so what you’re doing then is separating ownership to another level. Plus you’re just going to [00:13:00] be the member manager of that limited partnership. Then your asset protection trust would be the owner of that limited partner. And you’re the beneficiary of the trust.
Mike: Okay. All right.
So that makes a little bit more sense. W how do you feel about having a trust and Krishna should trust own an LLC or, is there different ways to use the trust and the LLC that provide greater protection?
Brian: Yeah, there are. So for entry level investors, one thing that, generally, because they don’t buy their houses or their assets, all cash, they’re generally getting a mortgage.
You’re not going to transfer that rental property with, that you put 20% down, straight into an LLC because the banks will most likely be unhappy. And you would be concerned about the due on sale clause being triggered. But what you can do is link it up with what’s called the Atlantic.
Okay. Land trust by the St. Germaine’s act and all trust you can transfer assets into a land trust. And then that’s how you connect that land trust to an LLC. [00:14:00] When you’re going into higher levels of protection. We do for a higher net worse. That same principle structure is maintained. The bridge trust.
The asset protection trust owns the limited partner. Which owns the LLCs that hold the land. So you’re still going to be able to transfer them into the LLC because it’s connected to the bridge trust. Okay.
Mike: All right. Interesting. Maybe we should back up a little bit here, we’ve taken this whole conversation to a little bit higher level, why don’t you explain what asset protection is and the purpose behind.
Brian: Yeah, that could, that would have been a good starting point. It’s let’s let us jump into a little bit of brain surgery, but not understand, this sort of the brain that’s okay.
Mike: We’ll come around. We’ll circle around.
Brian: We’ll get it. We’ll get there eventually. So it’s a great question. And and I think it’s misunderstood, partly because most just haven’t heard of that.
Asset protection or an, you watch movies or you hear about, the Panama papers or scams on TV or Netflix and you just lump [00:15:00] everything into one thing. But asset protection, isn’t traditional estate planning, it’s modern estate planning. It was created. As its own entity in the 1980s, early 1980s, when the cook islands created the asset protection trust, then 10 years later, we followed suit in Alaska creating domestic US-based asset protection trust.
And now 16 states have some sort of what’s called self settled spendthrift legislation, which means an asset protection trust. What we’re doing is placing a legal barrier between your assets. And your potential creditor, that’s it’s like a barrier, like a safe that you put your gold and your guns in anything of value you want to put behind the barrier and out of your personal name so that it’s not easily attached with the lean or reached or attacked with the lawsuit.
Mike: So one of the com one of the lines that everybody says is Pierce the veil of the LLC. What does that mean? How does that happen? What’s that all about?
Brian: Yeah, the way the dumb this principle [00:16:00] down is you can create an LLC to try to limit your personal liability, to do that. You have to run yourself like a business.
You have to have proper accounting. You can’t co-mingle assets. The way it appears piercing. It just means we’re going to disregard that entity. We’re going to not let you have that limited personal liability. And we’re going to be able to go after you and your assets now, personally. So like your house, your car, your other assets that aren’t put into that, LLC piercing avail is pretty easy because most people fail on accounting.
That’s one of the easiest ways to Pierce avail. It’s just because you commingled assets. If you’re a real estate investor, just by holding. That asset into an LLC, I’m going to, I’m going to argue through an impure surveil because it’s a shell entity and you’re just using it as yourself. So there’s really easy ways to pure surveils.
And especially over the last 10 years, the legal landscape is completely weakened, just purely domestic structures, especially LLC they’re being pierced all the time.
Mike: Why do you [00:17:00] think that is? You said that over the last 10 years, that whole structure has been weakened, what’s caused that day.
Brian: That’s really happened over the last 30 years. What’s changed over the last 30 years as the legal, system’s not about justice. It’s just really about profit lines. And then each state like there’s red states, blue states, some states w have a strong asset protection laws. Some states have very weak ones and they don’t really care to protect your assets and are going out.
Investors and wealthy people’s assets. So a lot of it will depend on what state lines you have, but the legal system itself, like I said, it’s not about justice, it’s a business. And over the 30 years where you have attorney advertising and commission-based attorneys that are. Taking, a percentage off of your damages with no skin in the game from the client has nothing to lose.
The attorney’s just trying to reach for a big pay day on somebody with money, and it’s now jaded the legal system. And then the legal system has now become just a business. So we hire sales, developers, business developers, [00:18:00] and we’re just driven by a profit line. So if I’m going to spend $50,000 on a case, I better make, a hundred thousand to justify the cost.
Mike: Sure. What are you really protecting here? Are you protecting gross income, gross revenue? Are you protecting net value? What, what really gets protected in that asset protection piece? Yeah,
Brian: The quick answer to that is for protecting net. And so I’ve heard you you might’ve heard the saying some of your listeners might have heard this saying.
Gross is vanity net is sanity. Cash is king. So what the same means is that for both business and in real estate, gross income is what’s perceived to make you a big guy. I’m a successful investor. And so let’s say you’re at a party, a cocktail party and, or an investor tells you, yeah, I gross a hundred million dollars a year, and then I have a 1% margin, it must be a really big successful investor.
Maybe not. The next question is, okay. How much do you net out of that 4%. Okay. Only 4 million. And you’re like, that’s [00:19:00] not terrible. That’s really good. Who doesn’t want $4 million a year, but in reality, cash is king, so this leads to the next question. What’s your cashflow?
Let’s say this person is cashflow negative and bleeding. So this story is now complete, completely turned differently. Like they’re not as successful as you would think. So gross income is just vanity. This $100 million a year business man is really not that big. It doesn’t have much that we can go after when it comes to real estate, the same thing applies.
You can have a $25 million real estate portfolio, but let’s say 20 million of that mortgage. So you only have 5 million. So you only have 5 million that somebody can come after, and then if you’re cashflow negative, you’re bleeding. So from an asset protection standpoint, the business, guy’s not that attractive for a lawsuit.
And you’re the real estate guys, not that attractive for a lawsuit because we’re only talking about 4 million, 5 million on cashflow and they’re cashflow negative. The banks are going to be in a higher price. Whoever would come in to collect a judgment would take a secondary place below the bank. [00:20:00] So it’s even gonna be harder for someone to collect on them.
So this, when adds in the context of asset protection, it just shows what we’re really protecting is net. What can I actually get to you? And what money do you actually have that we can take notice satisfied, judgment lien. That’s what we’re doing.
Mike: Interesting. You’re popping the bubbles on a lot of preconceived notions.
I think that people one, one thing is w what role does insurance play in all of this? I think that people have a misconception that they can rely on insurance over and above the LLC. Absolutely talk about it. Umbrella policy, Hey, just get a a $3 million umbrella policy.
Put that over the top and that’s going to protect.
Brian: Yeah. Yeah. And insurance, whether it’s standard insurance, umbrella is going to be the same breakdown. Insurance, you got to have insurance is a great place to start, but it’s not the end. I see a lot of clients that just, like we said, in the beginning of the segment, they have this false sense of security thinking that, Hey, if I’m sued, I’m just going to solely rely on insurance to cover me for many [00:21:00] damages.
This isn’t the case. I recommend though that you have insurance, and have as much as you can afford. But you need to read the insurance policy, read the fine print when I do teaching seminars and I get up on a PA, in front and say, Hey, everybody re raise your hand, who read the fine print of your insurance policy.
I’ve never seen a person raised their hand. And you need to understand what’s not covered, what’s the claim limit, so a good place to start is to actually first understand that real estate law, if you’re a real estate investor is going to be the most heavily litigated area of law.
There is same with owning a business is really just a matter of when and in what condition you’re going to be in to defend yourself. When a lawsuit comes your way. Keep in mind that insurance companies don’t cover you for fraud or punitive damages. Like you’re not going to be able to go out and punch somebody in the face and expect your insurance to cover you.
They don’t uncover you for intentional wrongs. They don’t pay claims that are the direct results of unlawful acts. And so this is how it breaks out now in court, and what your listeners need to understand is this basic concept of insurance defense. Like you can be sued. And then from the very first [00:22:00] statement or communication or email you made with a buyer or seller at any point, even before the lawsuit, those are going to be based on allegations of fraud.
And the courts are going to go back and look at those statements. For example, you spending an email about plumbing and the courts are going to say. That’s an email, that’s a statement. So those statements are not going to be considered intentional acts. And what’s your insurance provider going to do their legal teams going to now say since those are going to be potentially deemed intentional acts, we’re not going to cover you for intentional wrongdoings.
And if you think we’re wrong, go ahead and Sue us.
Mike: Okay. Interesting. So let’s talk this through a little bit, say that, know my big question now is how do I separate or keep protected the protect my personal assets from my business assets. So let’s say that I’m a new investor. And I’m going to buy a small multifamily that I’m going to spend 400,000 on and have, 20% equity in it.[00:23:00]
But yet I have a net worth of a half, a million dollars. How do I protect do that one?
Brian: You there? Yeah. I’m here now, Mike. Oh, okay. Yeah,
Mike: you froze there for a minute, but you’re back. So yeah. How do I protect both sides of that line from my personal net worth versus my business assets?
Brian: Yeah. So when you’re starting out. You gotta just think we’re talking about layering. So you’re going to start out with the LLC, get it out of your personal name.
You may have to go and do a land trust with that your personal assets are going to be open at that moment because you’re not going to transfer your personal residence into an LLC. You’re going to want to keep those out because you don’t want to lose that 200. And I think $50,000 tax credit, if you were to sell in other IRS benefits.
The next stage up. But once you hit about that $500,000 mark is going to be limited partnership. That’s the next layer, your mid layer. And then when you [00:24:00] hit about that 1 million net worth mark, you’re going to be able to then add the asset protection trust or our bridge trusts that we use for that level of client, because what that’s going to allow you to do.
Put your house into that trust the bridge trust. And then that’s such a strong trust because it’s both classified domestic and foreign that it has. What’s called statutory and non-recognition attached to it. But now you’re protecting everything. You’re protecting your real estate. You’re protecting your corporate shares.
If you own corporate shares, you’re protecting your syndications because you’re putting those into the mid-layer. I mean protecting your personal residence. Cause you’re putting that into the asset protection trust. So as you go it’s you just.
Mike: Okay. Interesting. One of the things you said early on was that over the last 30 years, that the industry’s changed, that the landscape has changed.
How do you think that this environment with this pandemic, this COVID pandemic that we’re going through is [00:25:00] affecting the real estate environment. Where do you see the market headed as a result of it? Do you have any predictions or thoughts around any it. Yeah, I haven’t,
Brian: So I have a large part of my portfolio is Mike Klein and so are real estate investors and they haven’t really been hit surprisingly hard with COVID-19 or even collecting rents.
I have a couple of clients who just bought 25 Plex and they are increased rent and had a 99%, six, success of tenants pain. So wherever you fall on the landscape, I don’t know. But what you need to do is just mitigate your damages, for a future of COVID-19.
Yeah. It’s going to be a big storm, you just have to weather the storm and that’s just going to be through managing your cashflow and protecting your assets. So the sad thing is that we now have to add liability, caused by COVID-19 to the list of things that investors and business owners need to plan for.
We’re all doing the best we can. So I would just say, keep doing that. And then you’re [00:26:00] going to have to add the security from an asset protection standpoint of protecting your heart assets, because those are, what’s going to be able to help you ride the storm out. You don’t want a creditor telling you what art assets you have access to now because you might be losing them.
And so those would be the steps that I would take is, managing your money and protect your hard assets and then just mitigate what potential future negligence you’d have. By going through your business. It’s a model and saying, what do I need to do to clean up any potential future liability?
Where can I get sued from my business model? From a COVID-19 exposure or death, and it’s not just death of a person coming into the business and catching it and them dying. It can be passing it onto a family. Yeah.
Mike: And when we talk about business you could even be talking about an apartment complex that you own, and somebody coming in there and getting sick and some deaths
So exactly. And so it’s just a lot of cleaning stations, heavily trafficked areas, making sure that. You follow whether you agree with [00:27:00] them or not, doesn’t really matter. Just, look at this, the guidelines that are going out, I don’t care about people’s politics. I care about how are you going to get sued from what you have to do.
So just know what the guidelines are, whether you agree with them or not. And as long as you maintain your compliance with the guidelines and mitigate your risks, you’re going to start taking away negligent claims from people.
Mike: Yeah, I really liked the comment. I don’t care about people’s politics. I just care about helping them stay safe.
One of the, one of the things is cash is always king, right? And cash on the side and you have cash on the side. I think you’re in a better position. I remember back in 2008, when the economic crisis was beginning out of friends, say, Hey, you know what? I just sold my Jeep. And I’m hunkering down for this storm.
And today, he appears to be one of the smartest guys. I know, as a result of that. It’s how do you weather this? And what’s it look like for you going forward and, so that, that’s a question I would ask you is where do you see yourself in three to [00:28:00] five years in your practice and business and your own investment?
Brian: Yeah. In three to five years, I see myself having all my systems set up and then being on a beach in like Mexico or Hawaii, or just passively managing, all this that’s like I like my time because I have a tutor enrolled in a four-year-old and so I like spending as much time with them as I can and being present.
And so my whole system is I like talking to clients, but I can talk. Virtually, I can do what I do because it’s transactional anywhere. Yeah. And I see myself having my firm fully systemized by that point, and then practicing wherever I need to be at that time. And investment wise, like I said, I was just like passive flows of income in different buckets.
And so I like underperforming notes. I like lending money personally. I don’t want to be a lamp. I like things just to be very simple and I like investing through a self-directed 401ks because I [00:29:00] just, this for me, a better tax way to invest.
Mike: Nice. Yeah, I think that those conversations, a couple of those things that you alluded to the self-directed and the investing through your 401k, a lot of people miss that opportunity because they just don’t know about it.
And I think that’s something that for a future podcast would be a real good conversation. Hey, one of the questions I get a lot from people are. Tell me about a series LLC, should I have a series LLC? And I, cost me less money and I can put more deals into it. And any thoughts around that?
Brian: Yeah, it’s the same as an LLC. I use series LLCs, but it’s more limited than an LLC because not every state recognizes series LLC. And they’re not tested in court. And from an asset protection standpoint, I don’t take risks with clients in investments and money. So the issue is that we have, let’s say you’re a California resident and they don’t recognize the serious struggle.
And you have assets all over the different [00:30:00] state. One of them, you get sued in California. You have a series, LLC. A judge is going to say great. We don’t recognize the series structures. We’re just going to recognize you. As typical LLC, you just spent money on something that you thought was going to work one way and it’s not going to work that way.
I only recommend using series LLCs for clients who received. And one of the states that has series LLC legislation and the asset is owned in the state that has series LLC legislation. So I liked them, used them, just know the limitations of them and be cognizant of the state jurisdiction, statutes and where the where you are at and where the assets at.
And then anything is to base Fort level formation. It’s just as strong as any other typical LLC foundation. And then you build up limited partnership, which can then own that series, LLC. And then an asset protection trust or the bridge trust. When you want really strong protection.
Mike: [00:31:00] Yeah.
It’s interesting. I’m in Illinois and in Illinois, it comes up a lot about series LLC. And I’ve had attorneys here say, Hey, they’re a great idea. And they look good on paper, but there’s not enough case law right now that substantiates being able to try and do one, because if there’s a problem, it could be like a house of cards, and just all crumble underneath you. And I think that was a big point that you made is that there’s just not enough litigation around it.
Brian: Yet. I use strong systems. I use cook island, asset protection trust, or a bridge trust, which is both domestic and foreign because I’m a trial lawyer and trial.
I survived through cases. It’s not a strength in my viewpoint to say there’s no supporting case one way or the other. So I’m willing to use a series, LLC. That’s a big weakness. The strength is when you can sit there and say I got 40 plus years of supporting case law on this structure.
That’s held globally across the world and in the U S that’s a strong system because [00:32:00] when a client calls and says, Hey, do you have any case law to support this? I can say here’s 40 years ago. If you’re using a different system and you can’t provide that, no, I don’t really see where you can go to make a strong argument on that.
And so good foundational level, like an LLC, because you’re just going to use some of those same cases, with LLC law, but LLCs are pierced and are limited, limited liability series, LLC series limited liability. So
Mike: makes me rethink that whole, you put a spin on that word limited today.
For me, that made me think about it a little bit differently. I almost wonder with a new opportunity to elect the type of corporation you want. Do you think that you are even just better off going and stand with the S chapter corporations or a C corporation over a limited liability?
Brian: So it’s a good question. You’re going to, that’s where you have to straddle that fence on. Do you care more [00:33:00] about how you’re going to be taxed or do you care more about asset protection? And an S Corp is going to give you a better tax strategy. It’s not going to give you a strong as an asset protection strategy.
Even if I were to use a foreign asset protection trust, like we can still put those shares into the trust and protect it. It’s just a little differences. And LLC doesn’t have ownership, shares an S Corp. You’re giving yourself shares. So those shares can be attached with a lien. And so in real estate, you never want to put real estate into an S-corp.
You always want to put it into an LLC for the same reason. A lot of people start off with an escort because they talked to their CPA. And then when you’re starting out, you care more about. Then people come to me when they’re more successful and they have 15 LLCs or some of them are escorts. Then I got to fix those problems that they created when they just cared about taxation and money and systemized it a little bit better to where those single member LLCs with your personal name on it.
Not very good from an asset [00:34:00] protection strategy, but you probably were a little bit better on a tax implementation. Strategy. So then we simplify it, put it into, we keep that disregarded entity, at the LLC level, put it into a limited partnership, which is then not disregarded. And so that’s your layering structure.
And then you come back in with the asset protection trust. And so it’s just all where you fall in the line of the sliding, right? Yeah, it’s
Mike: interesting. Listen, I know today that you have probably given boatloads of, to a lot of people who are either have some experience or don’t have any knowledge around this, and this is going to be one of those podcasts that I think people are going to go back and listen to a couple, three times just to pick up what they might’ve missed.
What advice would you give a new real estate investor today?
Brian: Set up your system beforehand, I know that you care more about. Getting the next deal. But if you don’t think about how [00:35:00] you’re going to protect it later on, eventually all that hard work you can lose in one loss, do it. So you gotta budget for the protection and planning first, put that into your budget.
As you get assets, you put it into that, then that you could just scale up and you grow. Don’t reverse create it because if you call me up after the fact, when you’re already being sued, it’s the adage of, I would rather spend 5 cents on the dollar than 75 cents on the dollar. If you come to me before you got a problem.
We’re going to set the system up a little bit easier and it’s going to be less expensive if you come to me, when you’re already being sued, there’s a little, there’s only a few options that you have and they’re all expensive. Yeah.
Mike: That’s keeping the end in mind. I I just finished writing a book that’ll be out in the next month or so called exit plan.
And it talks about how to get out of the deal. And that we need to keep the end in mind. Stephen Covey years ago wrote that book seven habits of highly successful people. And he talks about that. And I think that’s what you’re talking about too, is make sure you’re doing that planning early on [00:36:00] so that you have that structure in place for yourself.
Brian: Absolutely. I know that there’s a sliding scale, you’re starting with an LLC, but if your goal is to be very successful, you’re going to outgrow that LLC at different stages. And then you’re going to need to grow, have that system grow as you can. Yeah.
Mike: Yeah. Interesting. Brian, how do people get ahold of you if they have questions or they want to use your services?
Brian: Yeah. I’m on LinkedIn all the time. I love LinkedIn. Also you’ve got my website, www dot BTB, legal.com. I have lots of educational videos. They’re a great frequently asked question page. Got free brochures that you can go through and read. You can email me, Brian, B R I a N S BTB legal.com. And I like.
Answering people’s questions because I’d rather have you educated than not reach out. And so that’s also why we do free consultations. I’d rather have you to get the free consultation and we’ll review your whole financial life. And then take what you want from it or not. You may not be a good fit for our [00:37:00] firm, but at least you get the good education and background to then go talk to other firms.
I would just rather have people be educated. Then not talk to a professional and looking it up on Google.
Mike: Sure. And I think that’s good advice. So I want to thank you for being here today. It’s been awesome. Spending some time with you getting to know about you and your practice a little bit more.
I want to invite my listeners that if they have questions to call you, we’re going to have your information up on our website. And I want to just say to everybody today, take what Brian has said into that knowledge bank that we always talk about. Continue to educate yourself, learn what you need to learn so that you can grow your business and grow it successfully and keep some protection.
Brian. Thanks for being here today. It’s been an awesome experience. I know that it’s been an experience for my listeners as well. And we will look forward to talking to you again soon here.
Brian: Yeah. Thanks Mike. For having me on.[00:38:00]
Kristen: Thank you, Mike, and thank you for joining us for another great episode of Insider Secrets. As always, Insider Secrets is brought to you by My Core Intentions. Join us on social media and visit mycoreintentions.com where you can get expert coaching on all things, multifamily investing in property management.
We’re looking forward to having you back again next week for more Insider Secrets.