Synopsis
Scott has been an asset protection attorney and a real estate investor for about 12 years. During this time, he has helped many clients avoid potential lawsuits, saving them thousands of dollars in the process. Scott believes that knowing what risks you face and how to mitigate or prevent them offers you the best chance of managing your assets well. In this episode, let us all learn from him as he teaches us about asset protection management.
Key points
Starting with Real Estate Investing
Scott and his business partner purchased a transmission and auto repair shop to finish law school debt-free. They put their earnings toward their monthly bills then flipped the building to pay off their law school debts.
Following graduation from law school, he worked as a litigation attorney while still pursuing his passion for real estate investing. Realizing that real estate investment was paying him more than being a lawyer, he quit his job and decided to work full-time in real estate investing. However, his desire to assist others in protecting their assets from litigation drew him back to being a lawyer, and it was only a matter of time until he established his own legal company, Royal Legal Solutions.
How They Protect Your Assets
If you're a real estate investor, Scott says you should have at least two limited liability companies (LLC). The first will serve as your asset holding company, and the other will be your operating company. You should also consider your tax strategy and estate planning.
Scott’s law firm specializes in creating anonymity around its clients’ assets. He claims that no lawsuits will be filed if people are unaware that you are a good target for a lawsuit. To ensure anonymity, they utilize revocable grantor trusts, in which all public records refer to their legal firm rather than their clients.
Types of Trusts
There are three types of trusts: revocable trust, irrevocable trust, and statutory trust. An irrevocable trust functions similarly to an irrevocable life insurance trust when it comes to estate planning. On the other hand, unlike an irrevocable trust, which you have no control over, a revocable trust is one that you have full power over; you may do whatever you want with it, including disbanding it. Finally, a statutory trust is created by statutory law like the Delaware Statutory Trust (DST).
Creating an Entity
According to Scott, if you are actively engaged in any kind of business, you should have at least one LLC that will function as your operating company to protect yourself from lawsuits. You also have the option of having a second LLC so that you can own your property anonymously. Moreover, if you are thinking of investing in two to six properties over the next five years, you may do so via a DST.
Tax Strategies
The basic tax strategies are S corporations and a solo 401(k). If you move your money through an S corporation, you can avoid self-employment tax on that money and be able to split the money in between dividend and income from your LLC, which is taxed at a lower rate than the normal income. Additionally, this allows your money to be converted from passive income to active income in which through resources corporations can now be used to fund a retirement account like a solo 401(k).
References
More from our guest
- For more information on Royal Legal Solutions' services, you can visit their website at www.rlspod.com/erei.