When people ask us “how do I protect my assets?” we have to tell them the truth. Anything that you own is vulnerable. That sounds harsh, but it’s a fact. Nonetheless, there are super-rich people out there that ostensibly own billions of dollars in assets. They have net worths into seven, eight, and nine figures. Sometimes more. That sounds like a pretty large surface area, though, doesn’t it? It sounds like they’re even more vulnerable than most to lawsuits and litigation.
But the truth is just the opposite.
Protecting Your Assets with LLCs and Trusts
The truth is that the very rich protect their assets by nesting them in series LLCs and trusts. They don’t personally own anything. That is to say, they don’t own anything in their name. What’s owned in your name is vulnerable. What’s owned in a trust is much less vulnerable and much more difficult to sue. The same is true of an LLC.
When a trial lawyer or a creditor goes after someone, the first thing they do is dig into their finances to see what kind of assets they have. Trial attorneys especially will turn and walk away when there’s nothing to pilfer.
Trusts and LLCs can effectively protect your assets from creditors, trial lawyers, and just about everything else. The question is how?
There are two main strategies.
For years, big-time investors would hold their assets either under their own name or under one vast LLC. By doing so, they left their assets vulnerable to a lawsuit. Series LLCs make it much more difficult, painstaking, and tedious to go after your investments. While you can still effectively have one major LLC, other LLCs can be held within that LLC. These are known as series LLCs.
By spreading your assets over a myriad of series LLCs, the assets must be attacked one at a time. In addition, each asset is insulated against an attack on another asset in the series. This makes the prospect of litigation very expensive, much more difficult, and for many attorneys, not worth the effort.
Series LLCs are hard to attack, but not impossible. The company that owns the company that holds the asset is still linked to you. It takes effort to find it, and may not be cost effective to target, but with enough due diligence, it’s still vulnerable.
Anonymous trusts, on the other hand, can hide your identity in relation to your company. In addition it can hide the company’s assets. In other words, plaintiffs would not be able to target you in a suit against a property.
This is why we tell our clients that the ultra-rich don’t own assets, they simply control them.