Get Rich Slick

As my financial wealth has continued to grow, I’ve become increasingly concerned about keeping that wealth. Warren Buffets two rules of investing are

1. Don’t lose money
2. See Rule #1

I can across a well written and highly recommended book regarding asset protection called Asset Protection : Concepts and Strategies for Protecting Your Wealth written by Jay Adkisson and Christopher M. Riser.

The book debunks many myths and provides some interesting examples at how creating complicated and extravagant “in your face” offshore trusts or other asset protection schemes can backfire and turn a simple civil case into a criminal case with jail time.

There are many practical things a person can do to limit their liability and properly and legally protect their assets. The author points out that the most obvious asset protections are generally the best and safest. Adkisson recommends a layered approach to asset protection and while I can’t cover every aspect of his strategy here, I think some of them distill down to the following:

While laws vary state to state, the right state can help protection many of your assets under existing laws:

States like Texas & Florida have generous homestead and property exemptions. If I’m not mistaken, Traditional IRA & Roth IRA (up to 1 million), 401k Plans (unlimited), Homestead (certain limits and restrictions) are exempt from lawsuits (except divorce) in Texas and Florida. State laws and exemptions offer the first layer of protection.

The second layer of protection is proper insurance. Often, an umbrella policy with one or two million coverage can be purchased for a few hundred dollars. Complicated offshore trusts and other schemes usually recommend cancellation of insurance coverage but his is a big no-no according to Adkisson.

The third layer of protection is one afforded to everyone: Bankruptcy. While usually a last resort, this does offer protection of some of your assets and can help unload heavy financial burdens placed on you.

The fourth layer of protection comes into play as subtle yet practical and innocent creation of Limited Liability Corporations and Trusts. The key in creating these is ensuring that their creation serves multiple legitimate purposes rather than just “to keep money away from US judges.” Legitimate uses include creation of family protection trusts, tax shelters, business protection amongst other things.

There are other facets in the book that make it an interesting read. There is a section dedicated to the whole “morality” of using any of these asset protection schemes and how they may be technically legal, they may be ethically and morally wrong.

I highly recommend this book anyone interested in protecting their wealth. Recent bankruptcy laws aren’t included in the book so be on the look out for an updated version and keep that in mind if ordering this book.

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A few times out of the year, various financial advisors, radio and TV personalities, and such will host seminars at key cities to sell their wares or offer advice. I often attend seminars whenever I can to see what the current trends are and advice being doled out to the public.

A couple of years ago, I attended one of these shows with the intent of seeing a segment that began at noon. It was an all day affair and I arrived early morning, around 8:30 a.m, to watch the presenters. I don’t recall the exact name of the company or presenter but he was touting “Asset Protection Legal Kits” to attendees. The “kit” was essentially some legal forms to help individuals create LLC’s and other trusts to protect assets from lawsuits and the government. Part of the strategy was to create an LLC and wrap that inside some Family Limited Partnership and blend together with some offshore magic. The sales pitch was slick and I was tempted (for about 3 seconds) to buy the kit which was selling for about $4000.

At the end of the show, the announcer calls out that the first 50 or so customers would receive some free goodies and a discount to sweeten the deal. A wave of people ran to the back of the room to pickup their “kits” and free goodies.
I passed on the kit and as I waited for the next segment to start, I got a call on my cell that my kid was sick and I needed to pick up some medicine so I left the event. It was a two day event with the same show repeating on Sunday so the next day, I headed in a little later 10:30 ish to see the second segment that I missed the previous day. Lo and behold, the same “special” for the legal kit was happening but I noticed a funny thing…. the SAME people that ran to the back to take advantage of the “deal” on Saturday were the same people running to the back on Sunday!

I decided to do a little research on the internet to find out more about the whole asset protection concept and the “kit” and, as I suspected, it was nothing more than a gimmick. An expensive gimmick none the less!

After some more real asset protecion research I came across a really good book regarding asset protection. It was recommended by various experts and the legal/finance web community.

This week, I’ll be providing a brief review of some of the best financial books I’ve read and recommend. You won’t be seeing any “don’t buy Starbucks every morning” or “spend less than you earn” books here; these books will focus on things beyond Finance 101 – they are tactical and strategic finance books that will help you undestand some interesting elements about finance.

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