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Proven Podcast
Lawsuit-Proof Your Fortune - Blake Harris
00:48:50
In this insightful episode, Charles sits down with Attorney Blake Harris—asset protection lawyer and founder of Blake Harris Law—to unpack the strategies, structures, and legal safeguards that protect wealth in an unpredictable world. Blake breaks...
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- [00:00]
A
Welcome to the Proven podcast where it does not matter what you think, only what you can prove. Our guest today is attorney Blake Harris, managing attorney at the nation's largest exclusively offshore asset protection law firm and proven expert who has helped clients protect millions in assets from lawsuits, divorces, and creditors through offshore trust structure. The show starts now. Everybody, welcome back to the show. Today I have attorney Blake Harris with me. Thank you for joining, Charles.
- [00:27]
B
Great to be on the show. Thanks for having me.
- [00:28]
A
Absolutely. For the fewer people who don't know who you are, kind of give a little bit of a background of who you are and what's going on.
- [00:35]
B
For the last few people who haven't heard of attorney Blake Harris, I am the managing attorney at the nation's largest exclusively offshore asset protection law firm. Myself and my team of attorneys and support staff, we help individuals create structures so that in the event that they go through any type of litigation or lawsuit, they're able to keep their assets safe from any court judgments.
- [00:58]
A
So when you talk about asset protection, let's talk about the difference. First off, most people don't understand what the difference is between an asset and a liability. So I've always learned that as assets make you money, liabilities cost you money. I'm guessing you're a little bit higher than that when you're talking about what type of asset protection are we talking about?
- [01:13]
B
So an asset is simply in the world of asset protection planning, something that somebody can take away from you. So if you have an asset worth $100, but there's debt on, on that asset of $90, you only have an asset worth $10. And then that $10 value is something that my firm is going to help you protect. An asset can be cash, stocks, bonds, crypto, real estate. Now, lots of assets are already protected, such as homes in certain states. Florida and Texas, for example, give you complete protection over your home. Certain states give a couple hundred thousand, some give tens of thousands, and there's a few that don't have any protection. So we'd employ other strategies for protecting that type of real estate. Also, up to a certain limit, retirement accounts, qualified retirement plans, IRAs, 401ks are also protected. Certain investments in annuities and insurance are protected as well. So we'd start off the process by looking at what is already protected. And then for what's not protected, we'd put together some strategy to make it so that it's unreachable by a creditor.
- [02:23]
A
So when people talk about creditors versus non creditors, who are the people that are Coming after your assets in this example, I mean, you're. Most people have spent a long time trying to build an empire and create some sort of business that's doing well. But then who are the people who are actually coming at it?
- [02:38]
B
So the three most common lawsuits would be, first of all, business disputes. You've got an employee who's not a former employee who's unhappy about the termination coming after their current employer. Or you have suppliers that are unhappy with their distributors or business partners, or for whatever reason. Business disputes are very common and that's a issue that you would want to plan ahead for. Perhaps you've sold a business and now the new owner of the business is not managing the business as well as you. They may try to undo that transaction. And when they do that, you could end up even going to debt because whatever you sold the company for a portion that got sent over to the irs. So business disputes would be the most common lawsuit. Next would be divorce. Divorce is actually the most common lawsuit, but in terms of asset protection planning, we see more business disputes followed by divorce. This is not going to be the most romantic thing you ever hear, but definitely look at signing a prenup or post nuptial agreement. These are not bulletproof strategies, but they do help to at least get both parties to a mental state as to what would be appropriate in the division of assets. And sometimes courts will respect them, but not always. Which is why it's good to have additional layers of protection. And then finally, car accidents. Our nation's roads are quickly becoming a highway to wealth. I would recommend buying as much car insurance as your agent will sell you. You. However, when it comes to insurance, my philosophy is buy but don't rely. Every insurance policy has a long list of exclusions which your insurance agent probably did not go over with you at the time that they sold you the policy. Every policy has a limit on the amount that they will pay out. And there have been many catastrophic claims which go well beyond policy limits. So you're looking at business disputes, divorce and car accidents as the three most common issues. But there's lots of different reasons people get sued.
- [04:31]
A
Jesus. So people come in, they make a certain amount of wealth, they're getting sued from car accidents, from divorces, from business partners or former employees. There was this idea that with specifically for employees that you could just make them 1099s and it's not a problem. Or if you sign a prenup, it covers the entire marriage. Put holes in that for me.
- [04:51]
B
So as far as a 1099, you have removed the issue of them being an employee. However, they could still come back and say, actually this would have been better classified as me being an employee. But even without that, that's still a business relationship you have with your contractor. And contractors sue the people they're contracting with quite frequently. As far as prenuptial agreements are concerned, these are closely scrutinized by courts and courts sometimes will uphold them. But lots of times they'll say, this was signed so long ago, or what happened here should not apply because there's some other bad action, or this is unreasonable. Perhaps one party wasn't represented or they weren't properly represented. And the courts are going to say, we're not interested in what the contract says. We're interested in doing what we as a court feel is right. And they will disregard the prenup and go after assets which both parties had previously agreed to keep separate.
- [05:49]
A
So a court can just throw out the prenups like, nope, this doesn't, this is not applicable anymore. And it's based on the court's decision.
- [05:55]
B
U.S. courts have broad powers to gets the results that they want. Some judges will simply follow the law. But lots of judges are result oriented and they're not concerned about what it takes to get there, even if they have to disregard legal documents.
- [06:11]
A
Okay, so now that we know that court documents and contracts and prenups and all these other things completely can get disregarded.
- [06:18]
B
Jesus.
- [06:18]
A
One of the ways, now that everyone who's listening just wants and just are terrified, what are the ways? Are there certain vehicles, not as far as what you drive, but certain ways you can protect your assets. And if you could explain vehicles, the people who don't know, what are the certain ways that you could protect it?
- [06:33]
B
Absolutely. So for a better level of protection, what would be wise would be to set up a type of asset protection trust. With this structure, what you do is you hand over your assets to a third party who would then hold them for your benefit. Think of a asset protection trust like having a close friend, perhaps your next door neighbor, who you trust dearly. You go and you give your yacht, your boat to your next door neighbor. Now if you want to go ride around in the boat for the weekend, your neighbor will let you do that. If you want to enjoy anything that you've given to your neighbor, they can allow that. But if you get sued, nobody's going to be able to go and collect from your neighbor. Now, to take this a step farther, with an asset protection trust, there's a legal Requirement that the neighborhood also we should refer to them as the trustee has to hold those assets for your benefit. So while the trustee retains legal title, beneficial ownership flows into your hands. And within the world of asset protection trust, you have your domestic options and offshore options. And we can go into that more whenever you're ready to start asking about that.
- [07:42]
A
Yeah, absolutely. So if, let's say you don't have a neighbor that you really trust and you build one of these trusts and it's an offshore one, because we're going to get that into a second of why it matters. And, and thank you for taking us through this very elementary version of it. I just want to get everybody caught up because for a lot of people this is things they've never heard anymore. These are things like what I've never heard of this. There are proven things out there that work that aren't exposed because so many entrepreneurs are just trying to make it and get across that line. But now that, okay, I've made this wealth, how do I protect myself from lawsuits or anything else? What happens if I don't have. What is the difference between like I don't have a neighbor that I trust versus an actual trust?
- [08:17]
B
Well, there's the legal obligation of a trustee and they are in the business of selling trust, not necessarily the document, but getting people comfortable with their reputation, with their history, that they're going to do exactly what they say they're going to do. And that's why it's very important to properly vet your trustee. There are domestic options, there's lots of different international options. There are some excellent trust companies and there are some questionable trust companies as well. And having proper guidance and helping you select the trustee is going to be the most important decision that you make when creating an asset protection plan.
- [08:55]
A
So when you're talking about domestic versus foreign and you're talking domestic, I. E. In the United States, do every trust have to have a trustee to it or can it just be a board?
- [09:04]
B
Every trust has a trustee. Every trust has three parties, a minimum of three parties. First one is the grantor, also known as a settler. This is typically the client. Next you have the trustee. We would always recommend using a professionally licensed trust company. And then third you have the beneficiary, the one who has the right to receive distributions. And with the an self settled asset protection trust, the client is both the grantor and the beneficiary. And then you have the third party trustee in there as well.
- [09:34]
A
So there are talk about like you could set up in Wyoming or You could set up in Delaware and you can't penetrate the trust and all of these, can you? What are the truths about that? What are some myths you can dispel about doing that here domestically?
- [09:46]
B
So the truth is you can set up a domestic asset protection trust. There's about 18 different states that allow for the use of a self settled asset protection trust. But you should be aware of Article 4, Section 1 of the US Constitution, the full Faith and Credit clause, which requires courts to honor judgments and court orders from other states. So if somebody gets a judgment and goes to enforce that court order in a different state, and one of those states does not recognize domestic asset protection trust, there's an opportunity to penetrate the trust and the case law goes deep into that, which shows that there have been many situations where these domestic trusts have been compromised. I don't believe that they are worthless. I do think that they provide a nice speed bump into slowing down a creditor. But I certainly would not rely solely on a domestic asset protection trust if your assets are exceeding $500,000 or $1 million.
- [10:44]
A
So you talk about speed bumps domestically versus what you do specifically, which is foreign, which are these brick walls that people run into. Walk me through offshore and what does that mean?
- [10:54]
B
So with an offshore trust, the trustee bylaw is not allowed to recognize any U.S. court orders. So everything we just discussed about Article 4, Section 1, the full faith and Credit clause, it does not apply beyond the non recognition of US Court orders. There are several other hurdles which prevent plaintiffs from wanting to go and that again, offshore jurisdiction. For one, simply finding legal counsel that can represent you is going to be challenging because there's a limited number of qualified attorneys and US Attorneys cannot go and litigate in these other jurisdictions unless they happen to be licensed in Belize or Nevis or Cook Islands, which is extremely rare. On top of that, contingency fees are not allowed, meaning that you could have won a case here in the United States without paying anything. But as soon as you want to actually go enforce the judgment, you're going to have to come out of pocket. There's a much higher standard of proof in the United States. To win a civil case, you need what's called a preponderance of the evidence. If you can convince the court that 51% chance that you're right, you win. In the situation of an offshore trust, you have to prove a standard that the United States reserves only for criminal matters. That's a standard of beyond a reasonable doubt, basically a 99.9% chance that whatever claim you're putting forth is correct. It's a standard of proof that very hard to prove and to reason that most plaintiffs don't even want to try to go and litigate offshore. And it's a reason that most people who do go litigate offshore are not successful. On top of that, there's typically a hefty bond requirement, sometimes around $100,000 or more. And when you add up all these different layers, all these different hurdles, you're going to find that most plaintiffs, when they find out that you have an offshore trust, will do either, number one, drop their case. They simply just don't want to pursue international litigation. An attorney is going to say, no, I've got a mortgage, I need to pay. I need to focus on a place where I can actually collect. Or number two, you're going to find that the opposing party is much more willing to settle, and settlement is the name of the game. Now, if a client is hit with a completely meritless case, someone brought a BS case against them, I would simply say offer nothing, don't even entertain this clown. However, if there is a legitimate case and my client did harm somebody, I am going to advise them to make some settlement offer, but make sure it's reasonable, it's fair to the client, and then we can move forward. And the client is going to, the entire time, have the utmost peace of mind that their money is safe. They can pay off a settlement in an appropriate amount and move forward with their life without fear.
- [13:44]
A
Gotcha. So I'm guessing that not all offshore trusts are the same. And what are the places that you can have offshore trusts?
- [13:51]
B
So there's about two dozen different jurisdictions which allow for the use of an offshore asset protection trust. Mostly smaller countries that this is a. Interesting. A good opportunity for them to grow a financial services business. One which doesn't put a strain on their natural resources or an already overrun tourism industry, for example. But of those 20, 30 different countries which allow for the use of an international asset protection trust, there's only three countries which have good codified case law, supported legislation which routinely, frequently, and gladly work with Americans. Working with Americans is a little bit more complex because there's certain IRS reporting requirements. And a. A lot of the world just doesn't want to deal with working with Americans because of that headache. But some jurisdictions say, well, actually, those Americans, they've got a lot of money. There's a lot of people there who want to set these up. We're going to cater to them. So the three jurisdictions with good codified Case law supported legislation. Cook Islands, Nevis and Belize. Belize, great law in place. Not the best place to do business. The regulatory environment has proven to be a little bit unstable, a little bit unpredictable. In some circumstances we would utilize Belize, but it's generally not our first choice for setting up a trust. Nevis has a better regulatory environment. They have been in the business quite a while. There are some good trust companies there. However, our preference still is the Cook Islands. First of all, its increased distance from the United States down in the South Pacific, as opposed to close to me here in Miami and the Caribbean, decreases people's chance that they are going to actually go after it. Psychologically, it's farther away. On top of that, the Cook Islands has been in the business the longest and it's simply a very safe and transparent country. They do business in a way that is just not shady. They're very honest and open about how they do business. And there's a lot of trust that is well placed in the Cook Islands. No pun intended.
- [16:01]
A
No pun intended. So if there was a laundry list of assets, do you need a separate trust for each and every one of your assets or do you just have one umbrella?
- [16:10]
B
Tr so generally for asset protection planning, only be recommending one offshore trust. In the rare situation that we have somebody who is worth over $50 million, we may look at setting up multiple offshore trust. But for the majority of people, one offshore trust. If your net worth is between $500,000 and $50 million, we'd only be recommending one trust.
- [16:37]
A
So in that dynamic, if we have an offshore trust and we're trying to protect our assets, for whatever reason, we're trying to protect our assets. How does that affect taxes? Because here in the United States, people are generating a certain amount of money and they're doing different things like cost segregation and real estate and all of that, especially with the new bill that's recently passed, there's ways to handle depreciation and all that. How does having a trust affect that?
- [16:59]
B
Absolutely. We don't want to have our clients miss out on any tax planning opportunities. That's why we structure the trust typically as a grantor trust. So anything that takes place in the trust flows through to the client. Now, when the money's in the trust, it's still being invested. You're still earning dividends, you're still seeing your investments grow. If you're selling them, you may have shorter long term capital gains, but all of that is taxed in the exact same way be taxed. If the trust did not Exist. Now, you do need to be aware that there are certain reporting requirements when you have an offshore trust. You do need to inform the IRS and FinCEN that you have an offshore trust and an offshore bank account with proper guidance. Those forms are nothing complex to complete.
- [17:43]
A
Do trusts have multiple companies in them as well? So because I own multiple companies and I have multiple things that are spread across, do I just. If I already have these things established, do I have to destroy them or can I just move them over?
- [17:55]
B
Certainly no need to destroy them. One trust can own an unlimited number of bank accounts. It can own an unlimited amount of cryptocurrency, and it can own an unlimited number of businesses. Now, we would want to evaluate the businesses and see what the best strategy is for protecting them. Because lots of businesses, they may produce some good cash, but there are not, they don't have a lot of assets that somebody could take. It may be a situation where we want to keep the business out and then just as there's excess cash, put that into the trust. Because there's certain liability that's always going to be attached to the business that you're not going to be able to divorce from the business, in which case maybe keeping that out of the trust is, is the best strategy. Another situation is where you have a cat, where you have a company that has a lot of hard assets. What we would do is have the client perhaps decoupled the hard assets from the company, and then have the operating company, which has a lot of risks because it's dealing with suppliers and customers, lease those hard assets from a third party company and then have that third party company owned or backed by the trust, potentially even doing some equity stripping, which is probably something we should discuss here at some point.
- [19:06]
A
I was about to ask, you know, so I, I own a company. I make chocolate bars, whatever it is, and I have these machines that create and create all this chocolate. If I already own them and they're free and clear, do I move them into a different entity and then lease from it and basically pay myself access to that? Or how does that work? How does equity stripping work in that environment?
- [19:25]
B
Exactly. So we've got Charlie's chocolate factory over here, which then ha. Which has a lot of machinery in it. Charles forms a separate company, Charles's operating company, Charles's equipment company, and then the operating company simply leases these assets. When somebody sues the chocolate factory, they're going to find there's actually no assets to take. All the equipment is leased by this third party who's not Subject or tied to the lawsuit. And it's also going to be backed by the offshore trust.
- [19:57]
A
So let's say I have a car, I'm leasing it for whatever reason. If I've already done that, is it hard to move that type of thing into a trust? Or once it's already established, do I have to rent a new car or at least a new car? How do I do that?
- [20:09]
B
So if it is a rental, we'd probably leave it out of the trust because quite frankly, nobody wants to take your lease because then they are stuck still paying for it going forward. So leasing asset is a good way to keep yourself unattractive to lawsuits. No, we don't want to put rented property into the trust, whether it's a car or a home, condo.
- [20:32]
A
What are the, what are the things can you do to make yourself as unattractive as possible to be for lawsuits other than. I mean, because I think the trust really in my mind is if you've reached a certain level of wealth over 500k, you just, you need trust. There's just, there's no way around it right now. You kind of need that. And it sounds like if you do it in the United States, you just dispelled the fact that domestic ones, it doesn't matter. It's, it's kind of, you need something offshore and really get into the Cook Islands. So that makes sense to me.
- [20:59]
B
But going into, to address your question, making yourself unattractive, one thing is don't be flashy. Your cpa, your attorney, needs to know what's going on with your finances. But the more that you put your wealth out there, the more likely it is somebody's going to think that looks kind of juicy and wants to target it. Now, I do work with a number of people who they're able to grow wealth because they display wealth and situation. I say that's part of the game. You need to do your tiktoks and show your yacht and show your cars because that helps you grow wealth. Keep doing it. We're going to look to do other strategies to keep you protected, such as take good care of your customers. Generally, people don't want to sue somebody who they thought really cared about them. Now, on the other hand, if people get the impression that this person never really cared about me in the first place, they're more than happy to go ahead and sue and sue somebody. Include adr. Write these three letters down. Alternative dispute resolution. In any contract you have, whether that's with an employee, whether that's with a Supplier, business partners. It just makes sense that any dispute is settled outside of court by a neutral third party arbitrator.
- [22:14]
A
Gotcha. And you just add that to any contract and most people probably don't know an adr. Is this something that you can just chatgpt it or do you really want to go and work with a lawyer on this?
- [22:23]
B
US something's better than nothing. However, if you're asking a licensed attorney, we are not recommending ChatGPT to replace us just yet. But, but I, but I would say if you're not, if you don't have the budget for an attorney or you just don't want to spend the money on an attorney. Yes. Coming up with something on your own is certainly going to be better than having nothing.
- [22:47]
A
Yeah. With my last name being Schwartz. If it comes to not having the budget, it, that's fine. But if you can't afford it, please, for the love of God, whoever's listening, hire a professional. Please, for the love of God. It's going to save you in the long run.
- [22:58]
B
It's an ounce of prevention is worth a pound of the cure. And properly drafted business contracts where it's very clear how things are laid out and the terms the contract are fair and reasonable will go a lot farther than trying to litigate and fight it out afterwards.
- [23:15]
A
Gotcha. What are some of the major mistakes people make that run into you because you've done this for a while now. What are some of the things that you walk in? You're like that, that. God, I wish you guys wouldn't do this every single time. So a few.
- [23:27]
B
One of them is waiting too long. I get the call. Oh, I'm concerned that at some point I might be sued. Should I set up a trust? Well yes, that's exactly what a trust can do for you. And then six months later we hear from someone and they say I've already been sued. And at that point there may be an opportunity, might be an opportunity to do some damage mitigation. We're not going to be able to get them the same result we'd be able to get them if they did. Pre planning next is simply thinking that you don't have enough assets. The offshore industry is generally pretty well disliked by a lot of the legal industry because well, if everybody had an offshore trust, all the plaintiff attorneys, they would be going out of business. The defense attorneys would be going out of business to the man to go into law school and law professors got a business and then all these talented and brilliant and smart hard working individuals Would have to go get another job where they're actually producing something for society instead of just fighting over money.
- [24:22]
A
I like that option. Can we make that the option where.
- [24:25]
B
Everybody has an offshore trust?
- [24:26]
A
That would be amazing. Congratulations. Everyone needs an offshore trust. You graduated college. Congratulations, you have an offshore trust, period. I just think everyone should have this.
- [24:36]
B
Charles, I wish I could hire you as a spokesperson, put you on a billboard. The reality is also, most attorneys have not dug deep into this area of the law. It's an area of law that is not taught in law school. It's. It took a tremendous amount of time, effort, money, travel, in order to gain the level of understanding that I have that my firm has with these offshore trusts. And by putting this planning in place, we're able to let the clients free themselves of the fear of lawsuits. Back up for a second. What exactly was your question? Because I don't know if I hit it right on the point.
- [25:12]
A
You actually answered a bunch of questions and created new questions for me. So if people are coming in, in, and, you know, they have this and they want to protect themselves and they have these opportunities, doing it as soon as possible is super important. And we talked about the mistakes, and then what are the other ones? And then what are the victories that you've run into as well?
- [25:30]
B
Okay, so. And then the third mistake and then we'll get into the victories is not working with the right professional. We've seen a lot of people jump into this industry, and unfortunately, lots of people will get started down their path and then find out they're not going to be able to get approved with the right trustee because they did not onboard themselves, they did not do the proper onboarding, they did not disclose information properly, or even worse, they get a trust set up, but they're not able to fund the trust. It's an area that deals with the laws of multiple different jurisdictions where the laws are changing, the people in the industry are changing. You want to work with somebody who's very reputable and understands this industry, industry inside and out and really is dedicated to this industry. The chances that you're going to find somebody who can set up an offshore trust well for you, while they're also busy litigating probate cases and writing simple wills is pretty small. So the next option, the next thing is working with the right law firm, working with the right professional. In terms of victories, there's lots of victories that we've. That we've seen, and this is absolutely the most rewarding part about my job. When somebody calls and says the trust worked exactly as we hoped it did. We've had situations where people sold a business kind of like the example I was giving earlier. The new owner comes in and tries to sue the client. And what ends up happening is the client's able to settle for pennies on the dollar because of the structure that they've created. We've also seen situations where doctors will set up a trust just because they're concerned. Someday a patient may sue them. And then a few years go by, no patients ever file any claims against them. But their spouse files for divorce. And then at that time, their trust becomes a very effective tool in helping keep their assets through that crisis.
- [27:15]
A
So if someone's going to get married and wants to have that 67% value ratio in their life, do you recommend they do a trust or do you recommend they do a prenup?
- [27:25]
B
Belgium suspenders. The only downside to the prenup is you may piss off your spouse when you ask for one. But aside from that, I generally think a prenup is good, but you get much better protection with the trust. If you're only able to do one of those, the better results will certainly come from the structure which a US Court can't break.
- [27:45]
A
Have you ever seen a. Because I think you prefer Cook Islands. Have you ever seen a Cook island trust get penetrated?
- [27:51]
B
Absolutely not. Now, in the history of the Cook Islands, there's never been a time when a properly structured Cook Islands trust was penetrated. The times when a trust was compromised, the client kept money in the United States. So what you want to do is both parts. Let me back up. Asset protection boils down to two parts, Charles. Number one, the control of the asset. With the Cook Islands or Nevis or Belize, you're going to have a great jurisdiction for controlling the assets. And for all the reasons we discussed previously, it's not an attractive place for someone to go and sue. But the other aspect is the physical location of the asset. It is wise to have the physical asset outside the United States. And so this is where opening an offshore bank account comes into place. Sometimes in the Cook Islands, but more frequently in Switzerland or Liechtenstein, sometimes in Panama. Just as long as it's outside the United States. In a good banking jurisdiction, that is where you see some real protection. So we've never once had a client had their assets compromised. We've never once lost a penny for a client. In the history of the Cook Islands, I don't know that anyone has successfully broken into an offshore trust. Most property structured with assets offshore. Another Mistake, going back to your previous question is giving the client too much control. And this is something to stay away from. Where someone says, we're going to set up an asset protection trust, but you're going to be the trustee yourself. You're going to be the protector yourself. If you do that, you've really compromised a lot of the protection. But if the assets are offshore, if the trustee is offshore and you do this before, you're going to end up with, at minimum, very good result, most likely a great result.
- [29:36]
A
So when you hire these trustees, because, remember, as we talked about before, I don't have a neighbor that I trust. You hire a trustee. Can they just run away with your money? I mean, is there a risk there?
- [29:46]
B
That is a concern of every potential client. And it was a concern of mine when I got into this industry over 10 years ago. Now, having worked in the industry as long as they have, I've come to learn that these foreign trustees are better supervised than many domestic trustees. I've never seen a situation where a professional trustee ran. I've never seen or heard of a situation where a professional trustee just ran away with the money, except for one time, and that was a trustee out of Chicago. So is it a possibility? Well, when you put your money at the bank, it's a possibility it could get robbed. There's no real place anywhere in the world where money is completely safe. But what you can do is find someone who's, well, incentivized.
- [30:30]
A
Well, if I put it in the bank up to 250k in an institution, it's protected. So I'll get that back. About what? As long as I don't put more than 250k in each individual institution. But if I put all of my money in an offshore bank in Switzerland and Liechtenstein or wherever else it is, and then I pay everything with my Amex black card, and I'm just doing that. I'm still trusting someone to protect my assets completely. How do I make sure that that's safe?
- [30:56]
B
So I'd like to address that directly. As far as the FDIC insurance, first of all, I don't know that the FDIC actually has enough funds to cover, cover all the accounts it claims to have. And I've heard that the FDIC has some obscene amount of time, like 99 years to pay back the accounts. It's, I think, more of an illusion of protection than actual protection. Now, the government could always just print and print and print, which it's doing now. Which it's doing now. But there's some discretion in how it's being done. More important than finding a bank which, and I'll add Switzerland does have a similar FDIC policy. It's, it's about $100,000 that they insure. But on top of that with the Swiss banks, any stocks, bonds, crypto are considered off balance sheets. So even if the bank liquidates, you get to keep your full stocks, bonds, cash, not the cash. The cash will be part of the liquidation. More important than finding a bank which is going to have insurance when it fails is finding a bank that's not going to fail in the first place. And that's the reason that we love the Swiss banks, because they are highly risk adverse. They don't engage in prop trading, they don't engage investment banking. They won't. The banks we work with don't take money from outside investors who oppress from management to take risky bets. And the cash that they keep on hand is much greater than the cash that American bank keeps on hand. American bank might keep 5 to 10% of its cash on hand. Some of the Swiss banks we work with keep somewhere between 25, as high as 40 or even close to 50% of its cash on hand. Overall, it's just a much safer place to have your money than most US Banks.
- [32:39]
A
In order to set up a trust, is it beneficial to go to like in this case the Cook Islands to become a citizen of the Cook Islands? How do you handle that?
- [32:48]
B
Well, first of all, you will never become a citizen of the Cook Islands unless your mother or father is a Cook Islander. That's the only way you could become a citizen of the Cook Islands. In terms of travel, I go to the Cook Islands frequently as well as lots of other countries where we do business or may do business in the future. But for the client experience, you never have to leave home.
- [33:10]
A
Okay, so what is the orientation you talked about before, the orientation process? What does that look like if someone comes in, says, get it. I don't want to be sued. I don't want to lose anything. I need to put my stuff in different banks. Do I have to travel to Switzerland or Liechtenstein, which. Please say yes, because I would love to go there again. I love Switzerland. It's one of my favorite places in the world. I'm guessing you don't, but how do you set it up? What are the vehicles like? Do you have a bank that's foreign and then you're using an amex card or what do you, how are you doing all that?
- [33:36]
B
So if you do want to travel the trustees in the Cook Islands, the bankers in Switzerland, they are happy to meet with you. And the trustees and bankers, they do come to America to meet with their clients as well. In terms of getting everything set up, you'll first get the trust established. That's step one. Step two is get the bank account open. You then wire the money into your bank account. If you want a distribution, you simply request from the trustee, and provided that you're not ordered to make that request, that you actually want it by your own free will, the trustee will wire money back to you. You can also have the trustee step in and pay your credit card bill. This is not typically done unless there's a pending action against you. And putting money in your pocket would subject those funds to being taken away. But yes, the trustee can pay your bills on your behalf. They can lease you a car, they can pay your mortgage, they can pay for your children to go to school. But if, or if you want the money wired back to you directly, that can certainly. That's very common.
- [34:34]
A
What do you prefer in that setup? Do you put here, here's congratulations, you have a credit card. Just go use that, Have a nice day, and we'll make sure it's getting paid off.
- [34:42]
B
If there's no pending litigation, we recommend not having the credit card be paid by the trustee. We prefer to have the client just handle that themselves. If there is pending litigation, then yes, the trustee's happy to pay those bills on their behalf.
- [34:56]
A
Okay. And when someone builds a trust, let's say someone's in their 20s and they're 25, they come into this wealth, or they just have enough money that they want to protect, and they go to buy a house in the future, do they immediately buy the house and put it into the trust? Do they buy to an individual? And again, I know you mentioned that houses are protected, so maybe it's the second property. How do they. How do they handle this?
- [35:18]
B
Well, I do want to clarify that not all houses are protected. Most houses are not protected. Some states they're fully protected. Most states, it's limited the amount of protection that they have. You can either buy the house yourself and then transfer it into the trust, or the trust can buy it directly. It's usually administratively easier just to buy it yourself and then transferred. In that way, the trustee doesn't need to sign up on all the closing paperwork, but you can definitely have the trustee actually just go out and buy a house at your direction as well.
- [35:50]
A
Is it. So people who already own properties, is it hard to move it in. I mean, because that's my biggest concern. If I've got these assets, how difficult is it to move it in? Is it better to do it post or preemptive?
- [36:03]
B
It's not difficult. Now, for your primary home, that would go direct into the trust. For any other real estate that would be owned by an llc and then the LLC would be owned by the trust. You're not actually, actually moving the real estate, you're just moving the ownership of that LLC or whatever corporate structure we see is appropriate into the, into the trust. And then if there's no pending litigation, the client can even stand as the manager of the trust and the client can stand out as the manager, excuse me, as the manager of the LLC and still manage that rental property.
- [36:37]
A
What are the.
- [36:38]
B
Go ahead.
- [36:38]
A
What are the major mistakes people make when they like, what is the preconceived notion that people are like, oh no, you screwed that up, don't do that. Just, just don't do that anymore. Because a lot of people heard of this and you already dispelled some of them. Be it, you know, Delaware or Wyoming based, you know, companies, you're like that, that's, that's penetrable. So what are the ways that the other things that are just people believe because they listen to social media, which is adorable, but they need to stop and actually research and hire professionals. What are some of the things they run into?
- [37:04]
B
Well, there's definitely lots of good information on social media and there's lots of questionable information on social media. Well, actually Apple, right. Bad and wrong information on social media. And it seems like becoming a watchdog of the industry is now my calling, because it needs to. Because people need to know the truth. Here's another planning technique that more people should employ, and that's equity stripping. So you've got your rental property that's owned by an LLC, which is owned by the trust. That right there does give a level of protection. A court can't order you to directly hand over the property. It would require a separate lawsuit to go after that property. You have the ability to report on a financial affidavit that the value of that property is $0. Those two are small or medium hurdles for a plaintiff to collect. And they work better than pretty much any other. They do work better than any domestic strategy. But if you've got an asset that's got a lot of value in it, that's still in the United States and you can't move it overseas, you can move a bank account overseas easily, but you can't carve a piece of real estate and move that overseas. This is where it's important that people don't forget to do equity stripping. You will bring in a third party lender. They will loan you. If Your property's worth $1,100,000, they'll loan you a million dollars. And then you're going to take that million dollars and put it into your offshore account. If somebody tries to take that property from you, they're going to have to pay off that million dollar loan first. All of a sudden, nobody wants to take that property. What they'd rather do is take some settlement. And when you consider the cost of foreclosure, maybe 30, $40,000 to go after a million dollar piece of property for just $60,000, you may be able to just buy somebody off and say, let's just settle this case for $50, for 50,000 or $60,000 and move on.
- [38:59]
A
Gotcha. So it's really putting these blockers up in front of people just constantly because it's like, listen, there's here's things again. As you said, if you've done something wrong, if you're a client and you've done something wrong, then do the right thing. However, if the people are frivolous and you want proper protection, then do this is kind of what you're saying.
- [39:15]
B
Exactly.
- [39:16]
A
So what are the ongoing fees like? We'll get into what it costs to set this up. But is it once it's set up, is there ongoing costs you have to pay or how does that work?
- [39:25]
B
So there's four ongoing fees. Number one is the trustee. They're going to want to charge an annual fee of 3 to $7,000. Next, you have the protector. A protector may charge more like 1 to $2,000. The protector has a very limited role. They are an overseer to the trustee. And if for whatever reason we want to change the trustee, the protector has the ability to fire the current trustee and hire a new trustee. They could hire a new trustee in a different country if we want to just flee the Cook Islands. Or they can hire a different trustee in the same country if for whatever reason, simply having the protector in there is enough to keep most trustees honest and doing exactly what we want them to do. Well, simply having the clients rep, having the trust company's reputation on the line is enough to have them want to do it. Longstanding relationships, trust built in incentives are enough to want them to comply with everything we are requesting. Back up and repeat your question one more time, Charles.
- [40:27]
A
So what are the ongoing fees. You said there were four.
- [40:30]
B
So trustee, protector, the law firm's going to have some type of annual fee or an hourly fee that they want to charge to serve as your ongoing advisor. And then fourth, you have your annual tax reporting requirements, which a CPA is going to bill you a couple thousand dollars for that as well. So all and you're looking at get close to between five and $10,000 a year in annual maintenance for an offshore trust.
- [40:56]
A
Yeah, you mentioned before when we spoke before that there are people who do this on their own. They're like, hey, you know what? I'm not going to hire a lawyer. I'm going to do this completely on my own. I don't want to pay the 10k a year or 5k a year. What are some of the things and hurdles and mistakes that they run into that it just makes it just completely stupid to do that?
- [41:14]
B
Well, the fee would not be reduced. You wouldn't completely wipe it out. You'd still need to hire a foreign trustee, you'd still need to hire a protector, you'd still need to hire a CPA to complete the reporting requirements. I certainly wouldn't recommend trying to do the reporting requirements on your own. So skipping the attorney portion is something that people can do. And the reality is you're just going to have more confidence if you work with a professional, licensed attorney. It may work without an attorney, it may not work without an attorney, but the whole point of the structure is to give our clients peace of mind. And you'll have much more peace of mind working with us, a law firm that has set up hundreds or close to a thousand trust. They're going to know that you're doing things right. You're going to know that you're working with the right offshore providers, and you're going to know that you have the right legal guidance going forward when it actually comes time to use the thing.
- [42:10]
A
So when someone comes in and they want to do this and they want to set an offshore trust, what are the steps that they do? How do they pick a law firm? How do they know? And again, this is a hard question to ask because you are one. Why choose you versus something else? If people are like, hey, listen, you know, I heard you, you were on the grooving podcast. That's great. But I also want to do some other research. What is some of the research that they need to be looking into to understand? Because a lot of stuff that you just shared people have no idea about and they're going to do Their research, What are questions they should ask?
- [42:39]
B
I mean, I could give a quick pitch on my firm's re, on our firm's resume. We are the nation's largest exclusively offshore or trust law firm. We have third party verification from several trust companies saying that we have sent them more business over the past few years than anyone else in the world. And I could go on about how our team teaches continuing education. We've taught lots of other attorneys how to do this type of work. But what I would also say is very important is the communication style of the law firm that you're going to be working with. You want to make sure that they are responsive and that you just feel confident with their process. If people are not following through on the process before you get hired, that would concern me that they're not going to follow through once you get hired as well. Look into the reputation as well. Read reviews, see how long they've actually been doing this type of work based on their history of publications and past speaking engagements. There are some competitors out there who are claiming things that are not accurate. And I, I could go into people claiming they've been in business longer than the Cook Islands has had an asset protection trust law in place, people claiming they've set up more service, more clients than the total number of clients that have been or ever created a Cook Islands trust. So there's definitely companies to watch out for. But again, I think it very much comes down to trusting your brain, but also trusting your gut as well.
- [44:05]
A
Right. All right. So is there a laundry list of questions or, or that you should ask?
- [44:11]
B
Yes, absolutely. I think there's a lot of very important questions to ask. I would start off simply with your experience in this field. Are you exclusive to this area? Have you ever been to the Cook Islands? I think that's a very important one as well. If you're setting up a trust, you want to make sure it's somebody who has personally vetted these offshore, offshore providers. I think fees are something to consider because you don't want to necessarily go for the cheapest one. Actually, you definitely don't want to go with the cheapest one. I'll make that very easy. But you do want to go with somebody who provides you a very good value, somebody who's transparent about their pricing, somebody who's well networked. I think that's a very important part as well. And kind of equate it to like having a doctor who maybe they can, you have a foot doctor. And if they don't know any other, other Doctors and you have another issue. You've got to start the entire search from the very beginning. But if you have an attorney with a large global network and you have another issue that comes up with your asset protection planning, you need to open a bank account in a new country, you need to move the trust to a new jurisdiction. You accumulated some ip, you want to know how to protect that. And a well networked attorney is going to be a huge value add as well.
- [45:25]
A
So when they're doing this, how long does this take? Is this a weekend thing? Is this a year thing? How long does it take to properly set this up?
- [45:34]
B
So right now we are telling clients it takes about 30 days to get the trust established. I have been working with several people down the South Pacific to expedite that process. And by the end of the year, before next year, I think that I'll be able to quote clients a week setup time. The trust from 30 days it is. I'm constantly going out trying to negotiate better deals, make the process faster for our clients. But for right now, let's just set the expectation that it takes about 30 days to get the trust established. Then once the trust is established, it takes about 30 days to get a bank account open for the trust.
- [46:11]
A
Gotcha. If people wanted to track this down because this was a wealth of information, I'm sure there's a lot more questions that people are going to have about this. How do people find you? How do they get in touch with you? How do they get in touch with your firm? What's the best way to get a hold of you?
- [46:23]
B
Blake Harris Small all of the major social media platforms. I've got hundreds of thousands of followers across our various platform platforms. We have a book, I have a book that I've written. We've got lots of information on our website. I'd probably say BlakeHarrisLaw.com is the single greatest source of information, single source of information on the Internet. For information on offshore trust or simply contact my law firm, go to our website, fill out a contact form. A member of my team will reach out very shortly to schedule a call with one of our attorneys where we will be able to diagnose your current situation and recommend whether or not an offshore trust is right for you. I would say probably two out of three people who contact our firm. We don't recommend they set up an offshore trust. We recommend that they do some other type of planning, some other type of strategy. But if they do fit, then we are glad to work with them.
- [47:16]
A
Why are those couple people that you don't recommend, is it. Do they not have enough funds or what is the reason?
- [47:21]
B
Either they don't have enough funds, they already have an. Or they have enough asset protection already. Their assets are their retirement account, their home that's protected. Maybe they have another $100,000, $200,000, which I wouldn't necessarily recommend setting up a trust just for that. Now, there are some situations where we set up trusts for clients who have very small assets because either they've got big liability. It's a combination of two issues. If you have big assets, but there's no way you're ever going to get sued, which that's nobody. But if that was the situation, I would say no, you don't need an offshore trust. On the other hand, if they had fairly moderate assets, maybe 2, $300,000, but they had big liability coming, an asset protection trust could be very good for them as well. So it's a number of factors that we look at and also the optics of the situation. It's definitely better if there's no pending litigation. If there's some pending litigation, it's nothing too damaging. Then we may be able to set up the trust or certainly set up the trust to protect from future lawsuits as well. But if we've got somebody who either has some criminal background, which a trust company would not want to work on, or just simply doesn't feel right to work with, then we're going to not push forward with that client.
- [48:32]
A
Attorney Blake Harris. I really appreciate it. There's a ton of information here that I learned. Thank you so much for coming on, Charles.
- [48:38]
B
It's an absolute pleasure. Thank you so much for having me.
- [48:40]
A
Winners take action to protect what they've built before they need it. Your assets are either protected or they're not. There's no middle ground when lawyers come knocking.