All Forum Posts by: Mike S.

Quote from @Brian T Bradley:

When I was looking at offshore, St Kitt and Nevis trusts were the best. Cheaper options included Belize LLC.
Now I'm hearing about UAE LLC.

What are the current jurisdictions that are now the most recommended for offshore asset protection structures? Did some of them introduced new concepts (in addition to the usual limited look back period for fraudulent transfer and requirement to post a huge bond and use a local attorney)?

Last, I like your concept of hybrid structure that keep the fee and administration to a minimum until needed to expatriate the holding trust. At the time I was studying these structures, it was a novelty. Now it seems to be more often discussed.

Quote from @Brian T Bradley:

@Mike S. 

I think there’s a fundamental misunderstanding here about how offshore asset protection trusts (APTs) actually work and why they’ve been effective for over 40 years—even with U.S. real estate.

I believe I understand very well how offshore asset protection works. What I am stating, is even if the judge can not get any traction with the foreign jurisdiction, they will have no problem seizing the real estate directly.

As you mentioned, you would need to do equity stripping too to make sure there is no equity left, but then you better have a third party for the loan as if it is a friendly lean with a related entity, the judge may disregard it too...

As I mentioned, offshore trusts are excellent for asset protection, but are expensive and complex to manage especially if you need to hire a third party protector or trustee (I heard many horror stories of foreign trustees gone rogue). You also need a good CPA who understand how to file taxes for these offshore entities. But it is still my opinion, that for US based real estate assets, they are not as bullet proof as for other non real estate assets.

Quote from @Brian T Bradley:

3️⃣ A Bridge Trust® for maximum protection – If a major lawsuit occurs, the AMLP can be held by a Bridge Trust®, allowing assets to move offshore if needed.

I don't believe that the offshore leg of an asset protection system is warranted for US real estate as a judge can completely ignore the offshore entity/trust and seize the local underlying physical asset under his jurisdiction (the real estate).

Offshore is great however for other asset that can be moved if needed (brokerage account, cash, crypto, etc...)

Quote from @V.G Jason:

Again, a financial advisor. You guys sell this stuff, no one promotes this besides the one selling it. 

I'm sorry that I am a no one to you... I'm not selling anything and I am using cash value permanent life insurance and recommend it to my fellow investors.

Then no one promotes mortgage except mortgage brokers, no one promotes real estate except real estate agents, no one promotes syndication except syndicators... 

Quote from @V.G Jason:

 No, life insurance in all forms is an incredibly stupid vehicle to put money in. 

I strongly disagree with you. A properly structured cash value permanent life insurance can be an incredible tool in your wealth building strategy. You obviously have not studied enough this asset class.

By borrowing from it you can make your money work at two places at the same time, increasing your total return. It's a long term play as the front loaded fee takes a few years to recover from. But in essence it is not different than using a refi on a real estate property, except that you are protected on the downside as the cash value only goes up while real estate can go down. And on top of it, you have a life insurance to protect your family in case of early demise.

If it was so bad, why would so many sophisticated investors using them? You just need to find the right insurance agent specialized in this kind of policies as the run of the mill policy is definitely not what you want for that purpose.

Quote from @Thomas Rutkowski:

 Matt, You need to realize that when you are investing in real estate, you will be paying the loan interest from out of pocket. This is not going to have any impact on the policy whatsoever. Whether the market is up or down, you can still borrow against your cash value. If the IUL returns zero one year, it just means that you won't have access to that 6% extra cash next year... not a big deal.

That is why the Infinite Banking concept uses only Whole Life, as they finance purchases that does not make money, it is important to have minimum guaranteed return each year. An IUL can not do that. However, if you use your cash value loans to invest, you can absorb the volatility of the IUL and it does not matter if one or two years you don't get interest. What matters is, on the long run, the IUL will get better return than a WL.

Even with an IUL, if some years you need some specific gain, you can always set up a portion of your cash value to be allocated to a fixed income interest account. All the IUL I know of have some fixed interest accounts options.

Quote from @Don Konipol:

ONLY 15% fee.  So I pay 15% to get a life insurance product I don’t need, and to get access to my own money.   

That is the initial cost, but the internal gain of the cash value will recoup that cost in usually 4 to 6 years. Like other front loaded product, you want to look at the long term IRR. The IRR take into consideration the time/cost of money. Long term IRR is approximately 3 to 5% for a whole life insurance and 5 to 8% for an IUL.

It's no different than a mortgage on a house. You pay $100k for a house that has a cash value of $92,000 (closing cost, etc...). Then you can borrow approximately 70% to 90% ($64k to $82k) of its appraised value. A few years later, when your property has gained some value, the 70% to 90% you can borrow against is now above the $100k that you were out of pocket initially.

Quote from @Lane Kawaoka:

Everyone thinks they're bulletproof with an LLC, especially if it's in Wyoming or Nevada, right? But let me tell you, nothing is truly bulletproof. If your net worth starts climbing over few million, it's wise to think about adding some offshore flavor to your strategy.

Offshore is expensive but could be more bulletproof for assets that are NOT in the US. Especially not US real estate. A judge may completely disregard the offshore ownership and directly grab the asset that are in his jurisdiction ie the real estate.

So, if you have a stock portfolio or own foreign real estate, by all means, if your threat model justify the cost of a foreign trust and its trustee, then use these offshore asset protection trusts. They are really effective. But be very careful who you chose to manage these trusts, as there has been some people ripped off by local trustees. Don't go cheap and use a reputable, and probably expensive, bonded trustee. Also make sure that you have in your team a good CPA who is knowledgeable about the complexity of IRS reporting.

LLCs, if setup and maintained properly are very good. But again some mistake in the situs, operating agreement or day to day use can render them very weak. So again good legal counsel is warranted.

There are some hybrid solution between the local LLC and the offshore trust, where your local LLC structure is owned by a local trust. In case of threat, the local trust will expatriate offshore. You saved some money initially by not going offshore immediately, but eventually you get the same pro and con of offshore. But still your US real estate may get taken away from you.

Regarding the WY LLC, it should be your holding LLC. Each property should have their own LLC in the state where they are located. These LLCs are owned by the WY LLC. You get the anonymity and the WY charging order protection. Again, if you don't follow some simple rules on how to manage each LLC you may pierce the veil and lost the insulation between entities that you wanted, so it's not bullet proof but could be pretty solid if you do it properly.

Only some type of life insurance policies offer loans. These policies are usually permanent life insurance like Whole or Universal Life Insurance policies. Also, they need to have been issued with the goal of cash value accumulation as regular policies are usually crafted for the most death benefit with the lowest premium cost, limiting the cash value.

All the information of your current policies were given to you in the initial contract. You can also consult with your agent to tell you if you can borrow from your policy.

If you want to get a policy that is designed properly for high cash value accumulation you need to find an agent who is knowledgeable and willing to sell them as the agent is getting a lower commission on them than regular policies.

Quote from @Shafi Noss:

@Mike S. 

"If the property is held in a partnership the assets in the partnership do not automatically receive a step-up in basis like those held in a disregarded LLC."

"A failure to make a 754 election will result in the basis not getting a step-up."

Source: https://hmbtx.com/blog/step-up-in-basis-for-assets-held-in-a...

Does this source and conclusion look legitimate to you?

If so, then if the decedent didn't set up the LLC correctly, which happens all the time, gifting LLC interest could be very harmful.

After reading the section 754, it just says that to claim the step up basis for an LLC, you need to declare it with the LLC partnership tax return that year... Not a big burden. That is part of the different document, like the appraisal you also need to obtain to claim the step up basis... Not a big burden...

It has nothing to do with the setup of the LLC.