Douglass Lodmell challenges a common assumption about protecting wealth: accumulating assets and protecting them are not the same skill.
Many investors devote years to building their net worth, yet spend surprisingly little time considering how easily a single legal dispute could put that wealth at risk.
In this episode, Lodmell explains why preserving wealth requires thinking systematically about risk before a problem arises.
For investors focused on the long term, it’s a perspective that can prove just as valuable as the assets you’re working to protect.
Read the transcript below.
Transcript
Insurance vs. asset protection
Douglass Lodmell
Oh, I have insurance for my car. Well, no, you have insurance against your car. It’s not insurance for your car. Your car is worth $60,000 or $100,000. Yeah, you might get a new car if it gets damaged, but what you really care about is that if you cause $5 million of damage in an accident, it’s not your car they care about. It’s your bank account. It’s your real estate. It’s all the other things that you have. So insurance, again, is just covering the liability. It’s not covering the asset.
When I talk about asset protection or when I think about asset protection, I’m thinking about whatever the liability is, how do I cover the asset? So from my perspective, what I feel is most people are not really thinking about covering any of their assets. They’re just thinking about covering their car or their home, but they’re not covering their bank accounts. They’re not covering their business assets and their other assets because that’s really what is going to matter. So it’s a switch in thinking from liability protection to actual asset protection.
Monetary Metals
Welcome back to the Gold Exchange Podcast. I am joined by Doug Lodmell. He’s an asset protection attorney for over 30 years. He has thousands of clients who he’s helped protect billions in assets for. Today, he joins the Gold Exchange Podcast to talk to us and our audience about how they can help protect their assets and their wealth. Doug, welcome to the show.
Douglass Lodmell
Thanks, Ben. Appreciate it.
Why an LLC is not enough
Monetary Metals
Doug, I want to start with some kind of broad misconceptions that people have about asset protection. For some people, they say, well, I have insurance, maybe on my house or on some of my assets. I have an LLC. Really, what else do I need? I’m pretty much protected. What are those people missing?
Douglass Lodmell
So insurance is great. I am an advocate for insurance. The challenge with it is that insurance identifies a specific liability. So if it’s a car, it’s the car accident. If it’s a home, it’s a fire or an incident on the home. If it’s your airplane, it’s your airplane. It’s not going to cover anything and everything. So first of all, you’re just going to be covering a specific named event.
And two, it’s limited, right? You only have so much insurance coverage. It does run out and they will only sell you so much. So insurance is great if you don’t have a ton in assets, you’re just starting out. Insurance is fantastic. Even with a ton in assets, insurance is important, but it’s not enough. It’s not in and of itself going to protect a wealthy person’s full estate.
Monetary Metals
And what about something like an umbrella policy? People say, oh, I have insurance and yeah, maybe I want some more. I’m going to throw an umbrella policy on top. Is that enough or is that just another step in the process?
Douglass Lodmell
So an umbrella policy is a little misdirecting in my opinion. Because it implies umbrella, right? Like somehow it’s going to cover more, but it’s not. It’s just an excess coverage policy because an umbrella policy doesn’t cover anything that’s not already covered. All it does is increase the limits on your existing insurance. So your car insurance, your home insurance, all an umbrella does is make your $300,000 limits turn into a million or $2 million or whatever the umbrella limits are.
So it’s not adding additional coverage. It’s just adding additional limit on your existing coverage. Again, very important. So my wealthy clients, I absolutely encourage them to have an umbrella policy, but I make sure they understand it’s not going to cover more than what their auto and their home insurance already covers. So again, it’s just an important piece of a comprehensive plan, but it’s not going to solve all the problems.
Inside vs. outside liability
Monetary Metals
And what are some of the assets that you find people generally tend to forget to protect? Obviously, the more valuable an asset becomes, the more likely you’re thinking, hey, I might want some insurance or some protection on this asset. Are there areas or assets that you notice people tend to forget, hey, I should really insure this or think about protecting this wealth?
Douglass Lodmell
Well, I mean, that kind of leads to the challenge with insurance, right? Because you think about, oh, I have insurance for my car. Well, no, you have insurance against your car. It’s not insurance for your car. Your car is worth whatever, $60,000 or $100,000. Yeah, you might get a new car if it gets damaged. But what you really care about is that if you cause $5 million of damage in an accident, it’s not your car they care about. It’s your bank account. It’s your real estate.
It’s all the other things that you have. So insurance, again, is just covering the liability. It’s not covering the asset. When I talk about asset protection or when I think about asset protection, I’m thinking about whatever the liability is, how do I cover the asset? So from my perspective, what I feel is most people are not really thinking about covering any of their assets. They’re just thinking about covering their car or their home, but they’re not covering their bank accounts. They’re not covering, you know, their business assets and their other assets because that’s really what is going to matter. So it’s a switch in thinking from, liability protection to actual asset protection.
Monetary Metals
And on that asset protection front, some people might say, well, I have an LLC, it’s a limited liability corporation here. So in a way, I’ve actually protected some of my assets. Are they thinking about that in the right way?
Douglass Lodmell
I mean, a limited liability company is good. It does have some asset protection. The way to think about LLC is that it’s kind of inside out and outside in. So if you put, let’s say, a rental property in an LLC, you’re doing two things. You’re trying to protect yourself from the rental property. So you have a tenant, the tenant does something stupid, somebody gets killed on their rental property. You want to stop the liability right there. You want to limit the liability inside the LLC.
That’s called inside liability. And inside liability is also the type of liability that you buy insurance for. So you buy insurance for your rental house, it’s a million-dollar limit, and somebody gets hurt on the property, the insurance is going to be the primary line of defense. And then hopefully that LLC will circumscribe that liability and not let it out of the LLC.
So worst case scenario is you lose your insurance or the insurance pays the max policy and they sue you for an additional amount and maybe you lose the property. So that’s inside liability. Outside liability is, is that you have a liability out here, nothing to do with the property. Let’s say it’s a car accident and you end up with a judgment in excess of your insurance and now they’re coming looking for assets. They’re trying to find things that they can get from you to satisfy the judgment.
The LLC protects against that as well because the LLC, they can’t just go to the LLC and go, oh wait, you got a million-dollar property in this LLC, let me just go and grab it because the LLC limits their access to it. So that’s outside in. So LLC is a great first start. I use them every single day. I mean, I probably do 50 LLCs a week for clients because it’s a foundational tool. But again, it’s not the end-all be-all. It’s one piece in a bigger puzzle, just like insurance is one piece of a bigger puzzle.
Holding companies and charging order protection
Monetary Metals
So as we continue to move up this immunity stack, I want you to tell us, what are some of those liabilities that people face that do have people coming after these other assets? What are some of the major things that you see, oh wow, this is where the problems all start?
Douglass Lodmell
I’ll tell you, the number one, ironically, is car accidents. It really is. It’s the most common thing that we all face every day. We all drive every day. There’s a lot of crazy driving on the roads, and statistically, all of us are going to have a car accident more than once in our lifetime. If you happen to be in wrong place at the wrong time and that car accident ends up in a death or disability or something major, exceeding your insurance is pretty easy to do. And so I would say the calls I get most often are underinsured car accidents.
That’s number one. They didn’t have enough insurance. They had $200,000 or $300,000. That’s where umbrella coverage would have helped. The umbrella would have actually raised their limits to $1 million, $2 million, $5 million. Now, probably they’re not going to need anything beyond the umbrella coverage. That’s number one.
Number two is all sorts of disputes as they relate to the way you do business in the world. This could include customer or patient disputes or client disputes, but it can also include partner disputes. So I think the area where people are often very blind is when you get into any kind of relationship with anybody, all of a sudden you basically open the door for them to have a reason to sue you. And I’ve just seen a lot of people that get into a business relationship.
They think it’s an investment or something else, and they don’t really truly understand who they’re getting into business with. They don’t really take the time to do the due diligence because they think, oh, it’s only a $100,000 investment. It’s not that big a deal. Worst that can happen is I lose my money. And it turns out they lose a lot more because they’re in bed with the wrong kind of person. So I think you just have to take seriously everything you do and definitely everybody you get involved with.
Jurisdiction mistakes that break protection
Monetary Metals
All right. So, Doug, we started this immunity stack on the very bottom, someone who has no insurance and they say, hey, maybe I’m going to add some insurance. Then they say, well, maybe I don’t have enough insurance coverage on some specific asset or liability. So I’m going to add an umbrella policy, which instead of covering more things, adds to my insurance coverage. Then they say, I want an LLC so that I can have this inside and outside help here on the structure. What is the next step in that immunity stack on top of the LLC?
Douglass Lodmell
If you have the assets and all of a sudden you have more than one LLC because you have more than one rental property and maybe you have assets that are not in the LLC, like an investment or a brokerage account or cryptocurrency or something else, then we’re going to add holding company on top of the LLC. So we might have multiple LLCs. Let’s just, for our example, say we have 5 LLCs with 5 different types of property.
You have one that has a boat, you have 3 that have investment real estate, and then you have one that has an airplane. These are all assets that have value. They’re also all assets that create risk. And so they all deserve an LLC. From there, on top of that, we create a holding company. That holding company can be another LLC or it can be another legal tool called a limited partnership. I actually prefer the second choice, the limited partnership.
It’s got some different unique strategies and features to it beyond what an LLC has. And so I will usually choose an asset management limited partnership as the holding company. And you’re doing a couple of things with that. You’re stacking, first of all, charging order protection. So you have charging order protection at the LLC level, and then you have again a second charging order protection, usually from a different jurisdiction now at the holding company level.
And you’re also consolidating the assets. You’re making it easier for your accountant to file the tax returns. You’re also putting them in a place where they can be worked with together, and that will be important when we add the third layer. So the holding company is critical once you get to a certain complication and a certain level of assets. So LLCs, limited partnership, and then ultimately a last step.
Monetary Metals
And before we get to that last step, I do want you to talk about these different jurisdictions. Obviously taxes play a big part in that, the structure of the law that you might be under. How important is picking that correct jurisdiction, whether it’s for the LLC, the insurance, or for these holding companies?
Douglass Lodmell
Yeah, jurisdiction is a pretty important concept in the law in general, and certainly in asset protection. What is important to understand is that you sometimes have a lot of flexibility in choosing a jurisdiction and sometimes you really don’t. And so a lot of times I see people get in trouble because they don’t understand that distinction. And so they think, oh, I’m going to choose the best jurisdiction. And then they don’t understand that they’ve actually used it in such a way that exposes them more, not less. So I’ll give you an example.
For LLCs that hold real estate, we will typically pick the jurisdiction of the state where the real estate is located. Why? Well, because an LLC holding a piece of real estate in whatever state it is, is doing business in that state. By definition, it’s holding a piece of real estate that is an investment property that is rented out. And so you are exposing yourself to that state law. So if you use, for example, a Wyoming LLC, which is very popular right now and everybody’s talking about it, and you then import that LLC into California and you hold investment property in California, what have you done?
Well, in your mind, what you’ve done is you have taken Wyoming’s better statute and you’ve now exported it to California and you’ve given yourself a better LLC to use in a state that’s known as not a great state. But what you’ve really done is nothing because that LLC from Wyoming is doing business in California. Therefore, it is fully subject to California law. It is going to have to register to do business in California. And so you’ve actually bought nothing. You literally have bought nothing except additional maintenance costs and requirements from Wyoming. So now you’re maintaining two states.
Taxes and why out-of-state LLCs don’t help
Douglass Lodmell
Something even worse can happen if you take an LLC which you think has a certain feature like a series LLC, which is available in a state like Wyoming or Nevada, and then you bring it into California and you try to use the series. And I had a client— actually wasn’t a client. I had a call from somebody one day who did exactly this. He had three pieces of real estate, and in California it’s expensive to have three separate LLCs. They each charge $800 of franchise tax. So he thought he would be clever. I think he went to Nevada and he got a Nevada series LLC.
He brought it to California and then he put each property in a different series. Therefore, he’s only maintaining one LLC in California, only one $800 franchise tax. He thought he was being clever. One of those properties had a mold claim. The mold claim was huge. It was like a $5 million claim. His insurance was $1 million. He called his attorney in California and his attorney told him, oh no, California doesn’t recognize series LLCs. That’s just one LLC here. He goes, but it’s not from here, it’s from Nevada. They recognize series LLCs. He goes, I don’t care because they’re not going to apply Nevada law, they’re going to apply California law.
So all he had done is actually exposed all three properties to the one liability. That’s when I got the call because he was trying to fix the problem. So this is the kind of thing that you want to be very aware of. It is okay to use a different jurisdiction for a better law, but make sure you’re using it in the right context. And that’s not at that first layer of the LLCs. It can be at the second layer of the holding company, though. That’s where we do like to diversify the jurisdiction and choose a jurisdiction that is more advantageous than likely your home state.
So that’s where we can use Wyoming or Arizona or Nevada or Delaware or Alaska, one of the states that has very good charging order protection, which is exclusive and has other features that make it advantageous. So jurisdiction is just something you have to be aware of. It can be useful, but it can also be used against you if you don’t know how to use it.
Monetary Metals
If you’re enjoying this conversation, you’ll probably want to check out our 2026 Gold Outlook Report. It’s our latest edition and it covers everything from fundamental prices of gold and silver, basis and co-basis data, as well as our macro outlook for the rest of the year and our price calls for gold and silver in 2026. It’s absolutely free to download.
Trusts, Cook Islands, and bridge trusts
Monetary Metals
What about things like taxes? Does that matter in which state you have your jurisdiction? Is that done on a kind of entity level? Where do taxes fit into this kind of stack?
Douglass Lodmell
Yeah, so it’s a great question because everybody is always trying to save money on taxes. So if you’re in a high tax state like New York or California, you think, oh, I can do a Nevada, Wyoming LLC or something where there’s a no tax state or Florida. That’s not how taxes work. Taxes work based on residency of the owner, not registration of the LLC. So it doesn’t matter if you do a Wyoming LLC. If you live in California, you’re going to be taxed in California 100%.
So again, you’ve accomplished nothing except additional costs and registration fees to do out-of-state LLC. Rarely are you going to be able to arbitrage your way out of taxes. There are very few instances where you might be able to structure something like that if you live in a certain state and you use another state. But I can tell you, even those loopholes, if we want to call them that, are closing quickly. You used to be able to use a non-grantor trust like in Nevada, and if you had just the right facts, avoid California state tax.
But California has since closed that loophole. If you live in another state, it might still be available. But it’s a little complicated. In general, I think everybody should take away from this that you can’t do a lot with taxes by just using a corporation from another jurisdiction.
Monetary Metals
All right. You mentioned the trust, Doug. Let’s go at the end of our immunity stack. What else are we missing from insurance to LLCs to holding companies? What’s left in this immunity stack for investors?
Douglass Lodmell
The last thing is really the asset protection trust, and that really sits at the top of everything. So it’s going to own the majority interest in the holding company, which in turn owns the majority interest or all the interest in the LLCs that are sitting at the bottom.
So an asset protection trust is kind of a unique animal. It’s a special type of trust that is created under a statute, and the statute has to be a statute that specifically allows for the creation of a trust for yourself, which is called self-settled, meaning I’m settling a trust for myself, meaning I’m the beneficiary, and I’m also able to put what are called spendthrift provisions into the trust. What a spendthrift provision is, is it’s actually a limitation on distributions to anybody who might be a creditor. And so effectively, that’s your creditor protection is those spend-through provisions.
Now, prior to 1984, there was no jurisdiction in the world where you could do this. You could create a trust for somebody else and put spend-through provisions in. So I created trust for my daughter and I say, hey, she can’t access this money except discretionary on part of the trustee. Her spouse can’t get it. Her ex-spouse can’t get it. Her creditors can’t get it. You can’t pay gambling debts with it. She can’t do anything with it. That is very, very good creditor protection when it comes to her.
But prior to 1984, you could never do that for yourself. It was kind of seen as not reasonable to put your own assets in trust and then limit your own creditors’ access to them. However, in 1984, a little island called the Cook Islands passed a statute, and the 1984 Cook Islands Trust Act specifically allowed for creation of a self-settled spendthrift trust. This was revolutionary, Ben. I mean, this was like earth-shaking back in the ’80s that this could happen.
And I can tell you a lot of people at that time, a lot of attorneys and commentators said, oh, this is going to get struck down. It’s against U.S. public policy. You can’t do this kind of thing. And so these trusts started getting tested. And the challenge for those plaintiffs that tested them is that they were domiciled down in the Cook Islands. So it didn’t matter what law you were dealing with up here, you had to go down there and apply Cook Islands law. And Cook Islands had a statute and it was very clear.
So these trusts started working. They actually held up incredibly well, even against plaintiffs like the federal government, the FTC. And so all of a sudden we had an industry. It’s like, oh, wait a second, these are working. So ironically, Ironically, in 1997, Alaska said, hey, we can do this. Why are we sending all this business down to these islands? Let’s just create our own statute. And so in 1998, they passed the Alaska Domestic Asset Protection Trust Act.
And this allowed statutorily for a person to set up a self-settled thrift trust for themselves as their own beneficiary. Now, what’s the challenge? Whereas in the Cook Islands, trustee was prohibited from recognizing any other jurisdiction’s court orders or judicial proceedings. The problem with the Alaska trustees is that they could not ignore a federal judge.
When asset protection makes sense by net worth
Douglass Lodmell
They could not even ignore a judgment from another state because we have a U.S. Constitution which requires full faith and credit between the states. It’s why you don’t have to get a new driver’s license when you cross state lines. Every state has to honor the other state’s laws and judicial proceedings, and therefore it became very difficult for the states to be asset protection jurisdictions against each other.
And so while we do have a lot of states that have jumped on board, I mean, 20-plus states now have DAPT statute. You know, Alaska and Delaware and even places like Tennessee and Alabama. The challenges is that the court and the case law around it is not nearly as good as the foreign trust.
So with the foreign trusts, they’re a lot more expensive. They have a lot more compliance. They have IRS compliance, they have trustee offshore compliance, and then they have costs that for most people are probably too significant. I mean, we’re talking $10,000 a year to maintain a foreign trust, in my experience.
That’s pretty common, if not more than that. And so they’ve tended to be off limits for a lot of people, whereas the domestic trusts have been a little more accessible but not as strong. And so I ask myself the question, well, is there a way that I can get the protection of a foreign trust with the simplicity of a domestic trust? Unfortunately, there is, and that’s called a bridge trust.
And what a bridge trust is, is it’s basically a foreign trust because it’s drafted as one. It’s registered offshore, it has an offshore trustee, but they’re in a standby role. And then the trust is bridged back and for the purposes of IRS compliance is treated as a domestic trust.
Monetary Metals
Trust.
Douglass Lodmell
So it’s very simple to manage, easy to use, and low cost in the world of asset protection trusts. And so that’s the trust that I use probably for 95% of my clients. The other 5%, we just go straight offshore. And I personally don’t really do domestic-only asset protection trusts because I just think, you know, either you should be offshore or a bridge trust is a better choice. I’ll just kind of pause there because that was a lot of information, so you might have questions.
Monetary Metals
Yeah, so I do want to ask you about at what levels of wealth do these different asset protection strategies make the most sense? Clearly, if you’re a young guy, maybe you’re just starting out on your wealth-building journey like myself, do you really need to have a bridge trust and pay these fees or these expenses to maintain a level of asset protection for so few assets versus someone who’s maybe further along in their wealth-building journey? Maybe they have kids, maybe they have multiple houses, maybe they have multiple businesses, and maybe they have some wealth that they’ve accumulated over the years. At what point, in your opinion, do these different asset protection strategies make the most sense?
Douglass Lodmell
Well, the answer is, is that when you’re first starting out and building your wealth, you’re probably going to start with just an LLC, one or more. So let’s say you say, I’m going to invest in my first short-term rental. That would be the time to get one LLC, and that might be it for now. You might just start with that.
They’re inexpensive, they’re not difficult to set up or maintain, and that might be sufficient. As you build, as you start to build your wealth and you have multiple LLCs because now you have multiple properties and maybe you have some investment assets, you’ve invested some crypto and now it’s worth $200,000 or $300,000.
Now that’s probably the level at which we’re going to add the holding company. So I would say between your first investment and $1,000,000, you’re going to be at the LLC with the holding company level. Once you get over $1,000,000 of assets that are not otherwise protected, and we can talk a little bit about that because there are other things that do protect assets besides asset protection. But when you get to kind of $1,000,000 of assets that are not otherwise protected in some way, that’s when we start looking at adding something like an asset protection trust.
What assets are already exempt
Douglass Lodmell
Somewhere between the $1 and $2 million is kind of the transition point. Once we get to $2 million of assets and that again, this is, this is assets that you can protect that are otherwise unprotected, then we really are talking about an asset protection trust like a Bridge Trust.
I will tell you, Ben, my most common clients are kind of in the $2 to $10 million net worth range. That’s where I see most of the people because again, that’s a lot of money, but it’s not so much that you can afford to lose a million or two in some crazy lawsuit. Suit. And so asset protection for someone with, you know, $5 million actually makes more sense in many ways than asset protection for someone with $50 million.
Monetary Metals
And now explain what are some of those ways to protect assets outside of these asset protection strategies we have been discussing?
Douglass Lodmell
Yeah, so there’s another set of asset protection in a way called exemption planning. And so what exemptions are, are these are the things in the law that already are given to you for free. So for example, in most states, there is what’s called a homestead exemption, meaning that some portion of the equity of your home is protected from creditors.
So in Arizona, it’s $400,000. In California, it’s around $700,000. Depends on the county and the median price, etc. In Florida, it’s unlimited. You could have a $20 million condo in South Beach and creditors can’t touch it. In Texas, it’s also unlimited. But most states, other than the few states that have unlimited protection, are somewhere, you know, in the $200,000 to $500,000 or $600,000 range. Range of protecting equity.
But that’s significant. I mean, if you’re just starting out and your first asset is your home and you’ve got $200,000 of equity, you might already be protected. So you don’t need to spend any money or take any extra steps to protect that equity. Another things that are also often protected are life insurance policies. Life insurance policies, the cash value of which is often protected and in many states unlimited. Again, Texas or Arizona, that’s unlimited.
You can have $10 million of cash value in your life insurance and your creditors can’t reach it. California, it’s very low. So it’s very limited. So that’s state-driven and it just depends. And so when I talk to a client, I’m always looking at the exemptions first. I’m saying, okay, well, here’s what’s exempt. In some cases we can say, you know, you don’t need to do anything. Your wealth is already in an exempt asset.
The other category asset that is protected is qualified plans. So things like 401s, ERISA, defined benefit plans, and for the most part in most states, IRAs as well. Federal government doesn’t want you destitute They don’t want you on public assistance. So they’ve actually given you a way to protect a certain level of assets. So if the bulk of your assets, let’s say you live in Texas and you have $3 million of equity in your home.
You got purchased a whole life insurance policy when you were very young and you’ve been contributing regularly to it for years. And so now you have $4 million of whole life insurance cash value. And then you’ve been putting money into your qualified plan. You got $1 million in there. You’re fully protected. You don’t need to take one more step. Step. All those things would be fully protected, and those are all called exemptions.
Gold, cash, and crypto protection
Monetary Metals
And what about assets that are slightly unusual? Maybe they’re not a 401, real estate, or life insurance. Obviously, that could be gold and silver, that could be crypto assets, that could be things like cash. Where do these kind of more alternative assets sit that aren’t obviously exempted?
Douglass Lodmell
Isn’t that funny how we call cash an alternative investment nowadays, or gold? Like, this is like the foundation of money. Nowadays, there are That’s ironic, I think. So these are all really important assets and they are not protected. So that’s exactly the kind of asset that needs to go into an asset protection structure.
So your cash, your gold, your crypto, any kind of other asset would go into that holding company or in some cases directly into the trust. Oftentimes crypto, because of the nature of the way the exchanges are selling it, it’s changing. But, you know, oftentimes you can only buy crypto in your own name with your own Social Security number.
So in that sense, sense, we would often assign the crypto directly into the Bridge Trust for protection because the Bridge Trust also uses your social because it’s the grantor trust. But between the holding company and the Bridge Trust and perhaps some LLCs, again, depending on the asset class, all those types of alternative investments are going to be in your asset protection structure for protection.
Monetary Metals
And another question for you, how does this apply to global investors? People who might live in the United States but might have assets outside of the United States, or they might live outside of the United States but have assets in the United States. How did these kind of complications affect this asset protection?
Douglass Lodmell
I mean, they do affect it because first of all, if you’re a US taxpayer, it doesn’t matter where you live or where you hold your assets, they’re all on the table. And so you need to plan for them. So we have clients with assets all over the world.
And so we make a determination if the asset can be placed in the asset protection structure, if it needs to be placed in the asset protection structure. If we’re talking about a non-US client and they have US real estate or US investments, We do have to put them in an asset protection structure because even though they’re not here, their investments are here. So it’s unique. We have to look at each client and look at their circumstances. But yes, we’re absolutely going to want to integrate most of the assets into the asset protection structure for US clients and non-US clients, frankly, if they have US assets.
Monetary Metals
And Doug, what about assets that are in some ways unprotectable? Are there assets that it’s really difficult to protect or maybe just not worth the cost of protecting? Are there certain assets that people should be thinking about? Yes, you know, this is valuable, but it’s just not fitting in that asset protection sphere.
Douglass Lodmell
Not particularly, because you can always assign any kind of asset into your asset protection structure. I mean, unless it’s an asset that is untitled or unassignable for some reason. But I can’t think of anything off the top of my head. I mean, when I look to protect assets, I look to protect them all.
I’m not trying to protect most of them and leave something on the table. I want to protect the maximum level of assets I can for my clients. I want them to, you know, take as much advantage from this structuring as possible. We may not be able to title every asset in, but we can use assignments to take assets that can’t be titled and we can still move them in there.
Monetary Metals
All right. Now I want to ask you more of a difficult question for a lot of people. You know, they might have a divorce, they might have an issue with inside their own family, the people that they trust, and maybe over time time, you know, those connections or those relationships fray. How does that— either divorce or through, you know, internal family dynamics— how does that play into this asset protection sphere where maybe this person was part of a trust and now you don’t want them to be? Maybe, you know, you had a certain relationship with them and now you don’t. How does that factor into the asset protection plan?
Douglass Lodmell
It’s a really important question. I’ll take it in two parts. If it’s a marriage, it’s one thing. If it’s just a partnership, it’s another thing. So we’ll take the partnership one first. So if you’re in partnership with somebody, the key is to make sure that you create the divorce plan before you ever start.
So if you’re going to invest with even your brother and you’re going to do investment real estate together, you got to have a buy-sell agreement and you have to have a plan so that if this doesn’t start working out, something happens, you know, you’re not on the same page as you thought you were, you have a clear path to getting separated. And that’s fairly easy because there’s no legal commingling of assets by nature of law or by operation of law in a non-marital partnership.
It’s whatever you’ve agreed to, but the key is doing it before you get into the partnership and definitely before you have a problem. Where I see people getting into real trouble is they just go into business with their brother or their parents or whoever, and they just don’t think about it.
They don’t have an operating agreement. They don’t have anything written down as to, hey, if we want to break up, what we’re going to do. Then you have a big, massive problem that it is hard to extract yourself from. So preplanning is the key there. Now, when it comes to a marriage, it’s a totally different story because in a marriage, by operation of law, The ownership of the assets is not just based on how you’ve titled the assets.
So let’s take a case where you get married, you’re both young, you’re in school, you don’t have any real assets. If anything, you have a bunch of student debt. And then over the next 20 years, you build a life together. But let’s say, as is most often the case, husband puts all the assets in his name because he’s the one that’s the investor. He goes out, he buys the real estate, he opens the brokerage account.
And so most of the assets are in the name of one party, could be the husband or could be the wife, it doesn’t matter. They’re in the name of one spouse. That spouse often has the idea in their head, because they’re in my name, they’re mine. And that’s not the way it works. They are the community’s or the marital community. And so based on the state that they live in will determine what the percentage is.
But I can tell you, if you started with nothing and you ended up with $10 million, in virtually every state, it’s going to be 50/50. 50/50. It’s going to be a marital estate. And so you cannot just say, oh, well, they’re all in my name. I’m going to go and I get these calls, hey, my marriage is on the rocks. I have most of the assets. And so I’d like to do some asset protection planning. And when I dig deeper, I find out you have most of the assets in your name, but they’re not your assets. They’re part of the community. And so that’s a case I would just decline.
I would say no, unless you’re going to do it together, I cannot protect you because you would effectively be stealing your spouse’s assets. Assets to protect them. Now, if you have clarity around the assets and their separate nature, either by a prenuptial agreement so that you’ve actually taken the time and the effort to say, hey, this is mine as we come into the marriage and this is what we’re going to do with the growth of it and the earnings and this is mine. That’s different.
Now I can take that prenuptial agreement, use it as the basis for creating a separate asset protection structure. On the other hand, if you get divorced, well, we got divorced, we had a property settlement. I used to have $10 million. Now I have $5 million. I probably am going to I get married again, but I don’t want that to happen again.
Then yes, now that’s a time when you’re not married that you could create an asset protection structure that would protect against a future spouse. The third case is where you actually did your planning together, where you had your marital estate, you weren’t planning on being divorced, you do an asset protection structure, and then later a divorce comes up.
In that case, the asset protection structure is going to be neutral. It’s not going to be able to be used against each other. It’s not designed for that. You’ve done it together. It’s going to be neutral. You’re just going to have to go through the normal divorce process and divide the assets as any other divorce would. So those are kind of the 3 main scenarios, Ben, that I can think of. Is there something else that you, you have in mind, another scenario that we might want to talk about?
Monetary Metals
Yeah. And what about these distributions? You said at one point, you know, part of the benefits of these trusts is that they limit the amount of distribution that can come out. How does that matter for potentially your offspring or the people that you’re using to have as beneficiaries of this trust?
Douglass Lodmell
Trust asset protection trusts are what are called discretionary trusts, meaning the trustee has discretion on distributions. There’s no guaranteed distributions. The trustee literally can just decide when and how much they’re going to give. At your death, that can change. So if you’re talking about a trust during your life for you, discretionary distributions are very powerful because they protect you from your creditors.
So if you have no right to any distributions and the trustee decides not to give you anything, anything, then the creditors can’t reach it either. However, if you die and now you want a specific distribution plan for your kids, that can certainly happen. You would just direct the asset protection trust to either distribute per your plan that you lay out in the trust itself or to distribute to an estate plan, which in turn will distribute how you want to your heirs. It’s very, very flexible.
And most of the time what I do is I have the estate plan connected to the asset protection plan. I don’t do the estate planning underneath the asset protection plan. Protection. I think it’s better to have a separate asset protection plan done in the state that you live by an attorney in that state, and then have the asset protection structure just distribute through that plan at your death.
Monetary Metals
We’ve talked a lot about the different states, how they handle asset protection, the different laws and legal liabilities you might face under certain states. Is there a rule of thumb for people who are listening right now? Is it that red states with maybe lighter regulation are in general better for this kind of asset protection? Is it all over the map? Are there you know, states in the north that are better in the south. What is this kind of rule of thumb when someone’s listening, they say, hey, maybe I live in Massachusetts or Tennessee or California, or should they just really have to look at their own state and figure out the intricacies?
Douglass Lodmell
I wouldn’t generalize. They’re all so different and it’s easy enough to find out for every state. So I would just look state by state. I can tell you the worst state for asset protection is California. The best state is Texas and Florida. So, you know, if you want to do red and blue, I guess you could say, you know, red states in that case. Are more protective.
So, but it’s not always going to be true like that. There are other states where, you know, they’re, they’re not as protective and they’re red states. So I would say the politics of it matter because they pass the laws, but I would not judge it on that. I would just look at the state. You know, if you’re in California, you’re thinking about moving somewhere, you have state tax considerations, asset protection considerations, and then living considerations.
I mean, where do you want to live? My personal feeling is that you should live where you want to live and not let the tail wag the dog and let taxes or asset protection because with good tax strategy and good asset protection planning, even someone who lives in California can be just as protected and have just as good a tax strategy as someone living in Florida.
Monetary Metals
This has been fascinating. I want to get us to the rapid-fire section, so I’ll ask you questions all over the map, all about asset protection, and you can answer as short or as long as you want. Let’s start our first rapid-fire question. What’s the difference between a revocable trust versus an irrevocable trust, and how much does that matter for asset protection?
Douglass Lodmell
Revocable means revocable means you can revoke it, which means that if you create one, you can uncreate it tomorrow. Irrevocable means you cannot revoke it. So if you create it, you can’t just revoke it. It does not mean it’s unamendable or it does not mean that it can’t be distributed and go away. It just means it can’t be revoked. For asset protection, it very much matters. Irrevocable is really key when it comes to asset protection, because if you have a revocable trust and you try to make it an asset protection trust, a judge can just come by and say, well, it’s revocable, revoke it. Revoke it and your asset protection gets revoked with it.
Monetary Metals
All right. Next one for you in the rapid fire section. What’s the difference between a safe asset and a risky asset in the legal sense?
Douglass Lodmell
In my definition, a safe asset is an asset that doesn’t create risk. So a bank account is a safe asset. A brokerage account is a safe asset. A crypto wallet is a safe asset. Anything that you’re not going to trip and fall on or get injured. A risky asset is something that the asset itself yourself can create the liability. So, a car is a risky asset, a piece of real estate is a risky asset, an airplane is a risky asset, a boat is a risky asset. Often, I’ll say anything with a door, a propeller, an engine, or a key is a risky asset.
Monetary Metals
I’m not sure where gold fits in that, but maybe that’ll be in the comment section. Safe asset.
Douglass Lodmell
Gold is a safe asset.
Monetary Metals
Gold, safe asset. I love to hear it.
Douglass Lodmell
Okay.
Monetary Metals
Next question for you. Let’s talk about our friend Warren Buffett. He pays less in taxes than his secretary. What do you think about this whole idea that yes, somehow Warren Buffett is stewarding his assets and then therefore his tax liability different than the rest of us?
Douglass Lodmell
So you just have to understand that the tax code in the United States favors creators. In other words, people who create wealth and create money. And it’s just the way we’ve drafted the code. Creators most often are the ones that have more money. So if you start a company, if you’re Elon Musk and you start a company, You never have to pay any taxes because your wealth is coming from an increase in value, which you never have to realize.
You can always borrow against and therefore never pay any taxes. Whereas the secretary who works for Warren Buffett, she’s getting a W-2, she’s getting taxed at the max, just right off the top. She doesn’t have any way to do anything else about it. I can guarantee you that she doesn’t pay more in dollar amount of taxes than Warren Buffett, but she pays far more as a percentage of her wealth and earnings than Warren Buffett.
I mean, that’s just the way we’ve designed our code. There’s arguments for both directions as to whether that’s a good thing or a bad thing, but I won’t judge it. Frankly, it’s just the way we’ve designed it. If you want to pay less taxes, you need to act like an investor and not like a worker. If you want to change your tax, you got to change your facts, as my good friend Tom Wheelwright says.
So it can do be done. It’s a process. It takes time, but tax strategy Can, and it is very possible for even the average wealthy person with just a few million dollars to change the way that they do things to be treated much more like Warren Buffett than like his secretary.
Monetary Metals
Let’s talk about some of those tax myths. What are some of the biggest tax myths that you constantly hear when it comes in the asset protection space?
Douglass Lodmell
The biggest tax myth I hear is by far that you could use offshore to reduce your taxes. That is just patently wrong. Anybody who says, oh, you can create an offshore company, trust, anything, anything offshore, put your money there and you don’t have to pay any taxes until you bring it back in the US. That is the number one tax myth. It’s not true.
The US taxes on worldwide global income. So it doesn’t matter where you make it or where you put it, you are taxed here. So anybody who tells you, oh yeah, we have this special kind kind of trust and we combine it with this offshore LLC and you don’t have to pay any taxes unless you bring it back. That’s just a straight up lie.
Monetary Metals
All right, let’s talk about some of the biggest asset protection myths that you hear. You might hear, well, you know, I’m in Wyoming and therefore I can bring it to California. What are some of these other myths that you hear in the asset protection space?
Douglass Lodmell
I mean, probably the biggest one is that insurance is enough. And I, I don’t know if it’s a myth so much as just a misunderstanding or an old paradigm that many people are living in. Again, prior to the ’80s, you didn’t really have a lot choices. You really did just have to buy more insurance if you tried to protect your assets.
You could do a little bit of corporate structuring, but there was no very specific asset protection tools. Between then and now, we have developed a very rich and diverse set of tools and a lot of tested strategies that we know work. The myth nowadays would be, well, there’s nothing I can really do about it. I’ll just buy insurance. It’s just not true.
There’s a ton that you can do. With proper planning and definitely before you have any real liabilities on the table, you can absolutely protect your assets. So I think it’s just more misunderstanding than myth. But, you know, I think that’s still out there and I think people are still being influenced by this idea that there’s nothing I can do.
Monetary Metals
Well, let me jump off that last point that you made. If I get into an issue with some of my assets, maybe I’m being sued or I’m about to get divorced, do I need to set up these asset protection vehicles before the issue happens, or are there any circumstances where either as the issue is happening or maybe after the issue is happening that I can set up some of these asset protection vehicles?
Douglass Lodmell
So the concept behind this is called fraudulent transfer. So what that says is that if you transfer an asset with an intent to delay, hinder, or defraud a creditor, then that transfer can be reversed. And so if you don’t have a creditor, you, you don’t have anybody on the landscape landscape, when you transfer the asset, it’s very hard for a court to say, oh, you did that with the intent to delay, hinder, or defraud this creditor because there was no creditor.
However, once you have a creditor, which means either the incident has occurred, the accident has happened, the employee was fired and walked out the door and said, I’m suing you, or whatever it might be. Now you have this potential creditor. Now the mental state of mind or the judge determining that you made the transfer with this intent to delay, hinder, or defraud that creditor can be implied to you. So it’s not a bright line test, Ben, where you just, you know, if this, then absolutely it’s a fraudulent conveyance. It’s a mental state of mind test.
But you have to understand that once the incident has occurred, it’s far more likely that a judge is going to see and imply to you that your mental state of mind was to delay, hinder, defraud a creditor. If you have a liability, it does not mean you can do nothing. It just means that you have to do it with this awareness. Awareness. And what matters is, was there insurance? Is the insurance likely to cover the case? So I get calls all the time from people who have something at risk. It’s covered by insurance. It’s almost certainly going to be fully covered by the insurance.
And they’ve been told they can’t do anything. That’s not true. They can do something because they have a liability, but they have a liability that’s going to be covered by insurance. They can still plan because they’re not thinking about this time. This time is covered. They’re thinking about next time. So it’s not automatic. And that’s why when you’re talking, you want to be talking to somebody who’s a real expert in this and not somebody who generically understands fraudulent conveyance.
I have heard more bad fraudulent conveyance advice from attorneys than anybody else because they don’t practice in the area. They don’t really understand fraudulent conveyance. All they remember from law school is, is, oh, you can’t convey an asset to get— keep it away from a creditor, but they don’t know how to do a full analysis. So I guess that would be another myth is that after you’ve had a lawsuit, there’s absolutely no way you can do any asset protection. It’s not true, but there are times when it will be true. You just have to do a full asset protection analysis and fraudulent conveyance analysis to determine whether you can or whether you can’t.
Monetary Metals
All right. And last question, the rapid-fire section for us. I want to take maybe someone who’s a typical listener of the Gold Exchange podcast. Maybe they’re 55, 60 years old. Old, they’re living in the United States, they have some gold that’s earning yield with Monetary Metals, they’ve got some real estate, maybe some rental properties, maybe they’ve got a nice 401, they’re a business owner. What’s the number one thing you would tell this person listening to the podcast right now if they haven’t thought about asset protection? What’s that number one most important step they can take today right after subscribing to the podcast?
Douglass Lodmell
Have an asset protection analysis. Get on the phone with someone like me, go through their assets and understand what assets they have are exempt and already what assets are at risk and on the table and what they can do about it. And then at least they’re going to make an informed decision. If they decide to do nothing, that’s fine, but they’re doing it with information. Information is power. You have to give yourself the information to make good decisions. So I would say their most important step is to get an asset protection analysis from a qualified asset protection attorney.
Monetary Metals
All right, Doug, that leads us into my last question. What’s a question I should be asking all future guests guests of the Gold Exchange Podcast.
Douglass Lodmell
Okay, well, I would ask, what is the most important belief that you have that has affected your life the most?
Monetary Metals
Doug, you make my job very easy because all I have to do is turn around the question on you. What is that most important belief you’ve had that’s affected your life the most?
Douglass Lodmell
The most important belief I have is that all things work to perfection. I truly believe that. My father taught it to me, my mother taught it to me, and it has served me very well because when things don’t go my way, I simply say Well, they’re all things that are working to perfection, and I start looking for what the gift is in whatever it is, the circumstance that I preferred not to happen. And I can promise every time I have found the gift and more. So that’s made my life very peaceful.
Monetary Metals
Doug, this has been a fascinating interview. I feel like I’ve gotten a masterclass in asset protection. For those who want their own Doug masterclass in asset protection, where can they find more Doug Lodmell and more of your work?
Douglass Lodmell
Of course, our website, which is just lodmell.com. I’m also on Instagram and YouTube and all that out there at Doug list, Lawdmail. If they just want to, you know, get ahold of me directly and do an asset protection analysis, they can reach out at support@lodmell.com. Just email us, let us know that you heard me on this show and I will not charge you for that analysis. And yeah, happy to speak with anybody.
Monetary Metals
Doug, thank you so much for the fascinating interview. We’ll have to have you back on again soon and stay safe out there, folks.
Douglass Lodmell
All right. Thanks.
Follow Monetary Metals on LinkedIn: /company/monetary-metals-&-co./
Follow Darius Dale on LinkedIn: /in/douglasslodmell/
