0:00 Who are [music] you? And where are you going? What [music] do you want? Hello and welcome to Trusts and Estates Weekly. I'm your host Kevin Bemel and I'm here every Monday at 10:00 a.m. Pacific time to talk about estate planning and trust and probate administration. Um primarily from the standpoint of professionals like myself and my guest
0:35 who I'll who I'll introduce in just a moment. Um but also for those of you who are shall we can we call you lay people? Well, that will hopefully that won't insult you, right? You're not involved in this professionally but maybe you've been appointed as an executor and you're trying to figure all this out. So, this is an opportunity hopefully for you to gain some knowledge so that you can handle your responsibilities uh better and and deal with your various uh advisors uh also um more easily. So, today I'm I'm very happy to welcome back Craig Redler. So,
1:12 Craig was on the show I think a couple of years ago now uh and um um Craig does um kind of a a pretty complex level of of asset protection that deals with trusts and that sort of thing. Uh he he is a
1:29 >> [laughter]
1:29 >> recent um evacuee from California. We lost another one. He's he's uh happily ensconced in uh in uh Phoenix, Arizona now. Um so, so Craig, you know, I'm sorry to lose you from uh my home state but but welcome welcome back to Trusts and Estates Weekly. Uh thank you. Thank you very much for having me and um yeah, a lot of levels I'm sorry I left California and I'll probably be more sorry in June, July, and August but right now it's lovely here. Well, I see you've got your ceiling fan I can see behind you so you know, you know, you'll you'll you'll we'll we'll lock you in your house and and
2:04 you'll stay, you know, reasonably cool. So. We've got a little pullout back and and my girlfriend who's an Arizona native tells me that in the middle of the summer here the pool is actually too hot to get in. So, I'm looking looking forward to that.
2:16 >> [laughter]
2:17 >> So, we're not talking the Pacific Ocean here that's pretty much cool all year. Yeah.
2:22 >> [laughter]
2:23 >> All right, well, well, just so you know, I have I have an extra bedroom in my house so I Thank you. Thank you. Be careful. I'm going to I'm going to show up
2:30 >> over here. We'll we'll we'll we'll set you up. We'll give you a little relief. I'll leave it running away from Phoenix and I'll show up at your door wearing nothing but a speedo. That'll be
2:41 >> [laughter]
2:42 >> It's so hot here so anyway, yeah, sorry about that. No, no.
2:45 >> [laughter]
2:45 >> I didn't want to ruin your breakfast. Well played. Well played, my friend.
2:50 >> [laughter]
2:56 >> Oh man, so many things going through the head.
2:58 >> [laughter]
2:59 >> Okay, we're going to refocus. We're both roughly as red as [laughter] the Yep. It's the Phoenix heat. That's what it is. Early heat stroke.
3:11 >> [laughter]
3:11 >> So, Craig, for for for um viewers and listeners who you know, didn't see your your first um your first time on the show, just give us a little bit about your background so so people can understand kind of you know, who you are and and how you came to um this I mean, it's it's really a an extraordinary level of expertise in what you do. Yeah, well, that I I started out litigating believe it or not and was doing jury trials the whole the whole nine yards at an insurance defense firm and was approached with a um an opportunity to do estate planning.
3:46 So, I a friend of mine from law school was working at a firm and he said we've got uh uh we're setting up a network of estate planners and we have a ton of estate planning work. So, I grabbed another associate at the firm I was with at the time we opened a firm and and we started to do estate planning and they sent us a lot. So, we I feel like we got we got good at it quick. We did we didn't know a lot but just given the volume that was coming in we had to learn learn pretty fast on the job and I and got got really good at it. Um that that particular firm so it's kind of desperate times call for desperate
4:22 measures. That that firm that was sending us all of this business uh at the time I was living in St. Louis, Missouri and what they had done is set up a network of of referral attorneys in all the various states where they do business and they were doing business in 12 or 14 states at the time. And and uh same gentleman who I had gone to law school with contacted me a couple years later and said bad news, we're we're just not going to be doing business in Missouri anymore. That's just a state where we're kind of retrenching a little bit and we're just not going to be doing work there. So, we had this wonderful source of business and it just went from
4:57 100 to zero overnight. Wow. And we had set up obviously fairly fairly uh a big infrastructure for handling the volume we were doing. So, we had a couple associates and we had big nice office space and we had uh uh paralegals and secretaries and the whole nine yards. And when that happened the two of us started scrambling around really hard to and we hadn't done much to to develop other sources of business Right. and we started scrambling around just to keep the lights on and started doing a lot of work that that was not near as appealing as as the basic estate planning work. Um
5:33 He bailed pretty fast, my partner and I soldiered on for a couple of months and just doing a lot of work like I said work I just wasn't interested in doing. We did divorce work and we did um kind of was work working on DWIs and just things that I just had no interest in doing. Um saw an opportunity to to you know, within the estate planning world still to to take a job as as general counsel with a trust company uh that that excuse me, managed irrevocable trust, discretionary irrevocable trust and um which is great, right up my alley but it it um was in in the Cook Islands. So, I moved
6:10 from St. Louis, Missouri uh uh um fairly good size American town of about 3 million people to a tiny little island in the South Pacific with about 8,000. And I moved moved to the the Pacific Ocean, little island called Rarotonga. And why why would a a trust company be interested in me in Rarotonga, Cook Islands? Cook Islands has the best asset protection statutes in the world. It was written by an American or the statute was written by an American attorney specifically for American clients and uh they service American clients and and and are just the best at it in the
6:45 world. So, diving in pretty much headfirst into the deep end uh going right out to the Cook Islands, sort of the epicenter of American asset protection and I am the only US attorney that's ever done that. Several worked out there. All the other lawyers out there are typically from Europe or New Zealand or Australia. Couple Cook Islanders but for the most part they're they're Westerners. Uh I got a chance to see these things work en masse. So, even I I do a fair volume of of of this kind of planning here in the states but at the end of the day
7:20 it's 15 or 20, maybe 30 clients a year where there we you know, our firm managed over 2,000. So, I I saw them written in dozens and dozens of different ways. I saw them challenged in every way imaginable. I saw them stand up uh no matter how they were challenged um and really really learned the the the the regulatory regime and the statutory regime out there and and again with that unique experience I'm literally the only American lawyer that's ever lived and worked out there and I didn't want to uh and repeat that too many times but it it's
7:56 important. I I have a unique perspective on how these things work that literally nobody else has. And um they work. Now now having said that, coming back to the USA um and it's kind of a long path from the Cook Islands back to Southern California and now here ultimately to Arizona. Uh I don't get to waste everybody's time with that but but uh and did some other things with offshore. Uh worked at another trust company in New Zealand for a little bit before I came back here and and uh the the point being is I I picked up a lot more uh on
8:33 on that journey than just the Cook Island trust. So, while the Cook Island trust is the gold standard for asset protection for certain clients and certain assets, it it's not for everybody and it's not for every class of asset. Mhm. So, in addition to the Cook Island trust we've got a fairly broad toolbox where where someone walks in and says Craig, I am I want to make sure that that my my future, my retirement, my lifestyle isn't jeopardized by a lawsuit, what can you do for me? I I usually start with well, let me see your balance sheet and I will look at a person's balance sheet and go all right, for these assets here's what I would suggest and for these assets here's what I would suggest and and we've got a tool
9:09 for every class of asset a person might have and by the time I'm I'm done with you presumably I'm done with you. That didn't sound good. By the time I'm done doing the planning for you, we get it set up right. Um we should have your firewall pretty good. So, if if someone ever threatens you with litigation you'll be able to sleep at night knowing that all right, no matter what happens, no matter how bad this goes Mhm. my lifestyle is not in jeopardy. My future, my retirement is not in jeopardy. I can I can go to bed knowing that no matter what happens that that that that we'll be okay. But more importantly I
9:44 anybody's ever been through litigation, even if you didn't do anything wrong and this is the USA, we like suing each other. You you you know, if you're you're in business long enough, unfortunately one of these days you're probably going to find your way to a courthouse. Right. You [clears throat] you can lose to win. All right, I proved I didn't do anything wrong, the court exonerated me. I'm I'm I'm good. Uh but I spent $100,000 on legal fees trying to make my point. Um the the the the the best thing this kind of planning can do for you is you get sued, you explain to the other
10:19 side, "Look, here's what you're butting heads with. Here's what you're going to have to deal with even if you get a judgment." I mean, I maintain I didn't do anything that that that where I damaged you, but whatever. Uh you know, juries are human beings, judges are human beings. Even if you didn't do anything, there's certainly no guarantee that you know, someone's not going to get a verdict against you. Uh you can say to the plaintiff, "If you If you want to butt heads with this thing, go right ahead." But I If they do any research at all, they'll understand very quickly that it it is difficult to impossible to to bust one of these things. And if they were smart, they they will uh
10:55 be interested in settling and usually at a substantial discount. So, if if you get sued and in the first 2 weeks, you can get out of the suit for a nickel or a dime on the dollar what they're asking for, well, in my world, that's that's pretty good pretty good win. That's a success. Yeah. So, so let me see this. It would just so kind of clarify the the various uh like the Cook a Cook Islands Trust, this this is uh these are tools for Americans to use or can they be used for people in you know, coming from any jurisdiction? Um they can be used
11:32 by people from any jurisdiction, absolutely. Um the the the industry started with this asset protection for American things in mind. So, that that really is kind of their niche, if you will. Uh it seems like each of the known offshore jurisdictions, the ones that people are are familiar and comfortable with, BVI's, Bahamas, Cayman's, they all have a little niche. And and this is the Cook Islands niche. Ha- Having said that, again, the the the statutes are strong, they are versatile, uh the fiduciaries out there are professional, they are just absolutely fantastic and and easy to work with and
12:07 they know what they're doing. Uh they they they are trustworthy, they are reliable. Um so, having said that, you can use the jurisdiction for any number of of things. So, for a person that's relocating to the United States or someone in in another country in Europe, you know, if you're in Europe or Asia or anywhere else, uh is a good currency agnostic place to do business. So, the the short answer to your question is there are a lot of other applications. So, I know that the the Financial Services Development Authority, FSDA they're called, is a governmental agency
12:42 in the Cook Islands and their their purpose is to promote the Cook Islands as a jurisdiction, had set as a goal that they wanted to expand who they were working with and the kind of kind of entities that were being set up there. And I I don't know how much traction they're getting or or what they're doing cuz I haven't frankly haven't followed it. But but It It's on their radar to to expand their presence worldwide. So, there there are other products beyond this asset protection trust. They've got a couple of other unique statutes there. They've got a good um uh foundation statute. They've got a good captive insurance statute. They They've got something called um
13:19 Oh god, I've never used it. Uh it's it's um God, I forget the name of it and I I actually talked to the gentleman that wrote it, who actually owns one of the trust companies out there and it's a it's a and he'd kill me if I remember the [laughter] name. But but it it it essentially it its purpose is to keep family businesses intact in the event of a divorce. Uh so, it it the statute is specifically written to create a tool that when you when you marry, you you fund family businesses into this thing. And if you ever find yourself in family court, which is again, where Americans so we we
13:56 we get divorced a lot. Uh the idea is is to to make sure that the family business survives intact. Uh so many so many businesses are ruined because of dissolution. So, the it's a long answer to to a your question, which in the short answer to that question is there are a lot of other applications that you can use the jurisdiction for that that aren't necessarily just asset protection. Okay. And then so then you mentioned that initially you'll look at the balance sheet, you'll see presumably what kind of assets are there and then kind of match tools to assets basically. So,
14:32 talk if you would, what are some of those types of assets and and what are the tools that that tend to match with them? Okay. So, and this is a relatively new development in California. Uh historically, uh IRA's were were means tested for for um vulnerability, I guess, for lack of a better term. And what what that means is if I got sued and someone got a judgment against me and they were looking for for property they could take to satisfy that
15:07 judgment, you know, assuming I didn't just get out my checkbook and write them a check on the way out of the courthouse. Right. Um IRA's were semi-protected in California. So, what what would happen is the plaintiff would take it would would get a writ of execution and execute that writ against the IRA and I would go and say, "Court, you shouldn't give them 100% of that IRA cuz I need that to retire on." And the judge would look at it and go, "All right. Well, I think you need X to retire and your your IRA is worth Y, so I can at least give the plaintiff that
15:42 delta." Um I I can say this for sure that what I think I need to retire on and what the court was going to think I what things I need to retire on are going to be two different things, obviously. But none of that even matters now cuz January 1st last year, so it's just been over a year. Uh uh the IRA's became um uh 100% vulnerable. They they are not protected in any manner. So, if I have an IRA that's that's worth a million dollars and I get sued and someone needs to needs to take it, they can come and take it. So, there's there's tools we can we can create to protect an IRA.
16:17 The the thing that is that is uh most important, uh even beyond the IRA, 401(k)s and things like that. Another ERISA plans are protected, by the way. So, not everybody's got that problem. Um what most people do have is a primary residence. So, again, the the the way these trusts essentially work is you're you're creating an entity that isn't you and you're not it and it is recognized under the law as as something completely separate and distinct from you. So, the argument is if someone gets a judgment against me,
16:52 uh and they come and they're looking for my property to satisfy that judgment, and uh they they shouldn't be able to take the property away from uh the this trust that isn't me. It's no different than taking your money to satisfy a judgment against me. I'm not you, you're not me. There's no reason you should have to pay a judgment against me. So, so that that's the theory. Trusts are recognized as separate from the people that created them for a lot of reasons and for some reasons they're not, depending on the nature of the trust. So, in the United States, there are 17, I think, was the last time I counted, states that recognize an asset
17:29 protection trust as a creditor protection vehicle, which means there are 32 states that do not. California is, of course, one of those states that does not. Um
17:39 >> [snorts]
17:40 >> Arizona, where I'm sitting right now, does not. Some of the states that are well known where they where where they do is the the the the top tier top tier states, the states that have industries that are similar to what the Cook Islands and the Bahamas and the BVI's have, Nevada, Wyoming, South Dakota, Delaware, Alaska. The those are the big American states. And then there are, you know, half a dozen others are that you know, 10 or so other states that that also have laws that varying degree of effectiveness. Tennessee, Georgia, Michigan, Ohio, Missouri. I I'm I'm thinking I'm certainly not naming
18:16 them all, but So, the point of all of that is is this. If I have property in California and it is accessible in California, like let's say it's a cash account at a bank. So, it's Bank of America or Chase or Wells Fargo or one of those. Someone gets a judgment against me. They walk into Wells Fargo bank in Los Angeles with a writ of execution and say, "All right, Wells Fargo bank, I've got a a judgment against Craig. I know he's got an account here. Uh here's this writ of execution, give me all of his money."
18:51 Well, Wells Fargo's going to do that. All right. If even if the account is owned by one of these asset protection trusts. Um my remedy, you know, they they're they're not Wells Fargo's not in the business of ignoring judgments. Wells Fargo is looking at a court order that says, "Wells Fargo, you're ordered to X." They are going to do whatever it is they're ordered to do. So, my remedy at that point would be to file what's called a motion to quash. So, I would go over to the court and say, "Judge, you shouldn't have have allowed this plaintiff to to take this money out of the bank cuz it doesn't belong to me." Naturally, the court's going to say, "Well, all right, well, who does it
19:26 belong to?" And I would say, "It belongs to the ABC Trust." And the court would naturally ask me, "Well, who who who established the ABC Trust?" I did. "Who's the beneficiary of the ABC Trust?" I am. In California, I'm going to lose that argument. Again, in the states like California and the 32 other states that don't recognize these trusts for purposes of creditor protection, the trust is not separate from me. It is it is my my assets are not removed from from being available to satisfy a judgment against me by being in a trust.
20:01 Contrast that with a Nevada or Wyoming or South Dakota, it's a different different analysis. Um So, point of all that is is this. What kind of assets do we need to use special planning for? Yeah, I can take That's why we use the Cook Islands. I can take my money and I can move it to a bank that isn't in the United States. It isn't Wells Fargo Chase or or or Bank of America or any American bank. And rather than own it in my own name, it's owned by a trust in a protective jurisdiction like the Cook Islands. At that point, it doesn't matter what what California thinks the trust is,
20:36 whether California agrees the trust protects me or not. As a practical matter, you you you can't take your American writ of execution and serve it on a Cook Islands trustee. It will go in the garbage. They'll ignore it. You you You know, it's really that simple. So, I can take my money and I can move my money from California to a foreign bank that's owned by a Cook Islands trust. I cannot pick up my real estate and move it to a foreign jurisdiction that's owned by a Cook Islands trust. Right. So, that's a long Again, very long way to get to the short point. Real estate in a non-DAPT state, a state that doesn't recognize asset protection trust, you need to do special planning for your
21:11 real property. Mention the IRA, the real property. So, it's things like that where we would have to do have to do special kind of planning. And and then of course, lifestyle also is going to determine. Uh if just a straight-up Cook Islands trust, I take all my my my money I'm not using presently, I put it in a bank say in Switzerland, it's owned by a Cook Islands trust. If I need that money, I do have access to it. And and there are other tools that we can we can we can build into the plan to to make it easier to access. But in general, it it is it takes time. If I need money out of out of um out of that uh trust, there's a process
21:48 and it can take four or five days. If I If I do something for a living where I, you know, I'm a day trader for instance, I I don't have four or five days. If I want to buy a stock, I want to buy it now. I don't have time to go through that whole process. Dear trustee, will you make a distribution and that that that whole process. Uh So, there there are other tools we can use that's still going to protect that money and and give you the kind of access you you you need to it right away. Um California is actually pretty unique. It's it's got a um a It's called the private retirement trust, 704115 CCP. It it actually is a a
22:24 straight-up state uh created in a retirement plan that's also a good exemption and protection vehicle. Um and I kind of got off course with that. But but just getting to the general question, what other kind of tools and and we've got and and So, well, the point of all that is this. A lot of it's going to depend on also with the client's needs. Mhm. So, if if um All right, you want the absolute best protection, Swiss bank Cook Islands trust. But I need some more flexibility. I need I need uh to be able to access these funds expediently. What do I do? All right,
22:59 you're going to sacrifice a tiny little bit of protection, but we're going to give you a little more versatility by doing maybe something else. Right. Right. Let's take a quick break and we'll come back and talk some more. Yeah. Am I going on too long with this? When life brings unexpected changes, managing inherited property shouldn't add to your stress. Magnum Properties specializes in probate and trust real estate management. We handle the complexities while you focus on what matters most. From property maintenance to tenant relations, from legal compliance to maximizing value,
23:36 we're your trusted partner through every step. Magnum Properties Inc., turning property challenges into peace of mind. Call us today at 213-264-4396 or visit magnumprops.com. So, so I you know, getting back to what you were saying right before the break, I I think this is an perhaps an under-appreciated aspect of estate planning that I think most people think of estate planning as making sure that my wealth
24:13 gets from me when I die to, you know, my heirs, my beneficiaries or whatever. But I It's it it seems to me that estate planning also has to embody the protection of those assets, the maintenance of that estate while I'm still alive. Otherwise, there may not be anything for me to pass along to my heirs, right? And so, you you mentioned um right before the break, California has this new uh vehicle for for protecting was it retirement income or
24:49 Uh it's it's in By the way, it's not new. This statute goes back from 1972, I think, or 71. Old statute. So, so what it is it was a recognition on the on the the part of the state of California, which I brilliant and I don't know why all these states have it. The state looks at it like if if people cannot pay for their own retirement, the state may end up doing it. Of course, the state doesn't want to pay for our retirements if it doesn't have to. Right. So, it it wants to give us a means by which we can get across the finish line with with enough assets to to take care of ourselves in retirement. Mhm. So, it
25:25 it's it's actually an exemption statute. So, so the way it works is this. You know, if you do a Cook Islands trust, literally the assets are there, it's just they're just not where creditors can get them. What what this private retirement plan or private retirement trust does is it exempts certain assets that are wrapped up in this plan uh from from being used to satisfy a judgment. So, every state's got exemptions and some states are are better at it than others. California generally, the exemptions are not really good. And by exemption, I mean there there are two categories of
26:01 property when it comes to litigation, property you can take to satisfy the judgment and property you can't take to satisfy the judgment. Um What we're doing with the private retirement plan is we're moving stuff from the can take to the can't take category. So, uh for instance, let's talk about this concept of exemptions. Uh in in in California, depending on the county you're in, but but most of the people that that that will be watching this I expect would be in the um the the the more urban counties, LA and San Diego, San Francisco and those areas. Uh they've got the highest exemption. So,
26:36 in for 2016 I have or 2026 rather, I have I haven't seen what what it it it's inflation-adjusted every year. So, I don't know exactly what it is in 2026 uh yet. I need to go look that up. But in 2025, it was around 700,000 for home home equity exemption. So, the first 700,000 of your home equity is protected. So, if you lived in a $700,000 house or less, nobody could touch it. Now, of course, in most areas in California, $700,000 houses don't really exist. Um so, it is of of of maybe of limited value. It maybe, you
27:12 know, like if you live in a three or four or five or around here, the sky's the limit, a $70 million house. Right. You know, it doesn't do standing though is it really applies to equity. So, if I've got a $1.5 million house with a $900,000 loan on it, I only have $600,000 in equity. And so then, nobody's going to be able to execute against my house because all they'd be doing is selling it and handing me back the cash. And so
27:39 >> That's spot on. Spot on. And they'll have to pay the the the the first mortgage first. So, they'd pay the bank first and they'd pay you up to 700,000 or whatever the the limit is for 2026. So, spot on. So, in in that respect, look, if you if you've got a mortgage on your house combined with the exemption, you you you might be in good shape. Mhm. So, what what this private retirement trust does is it takes more routine be available to creditors and makes it so they're not. Um And and uh pretty much it it's very broad categories of things you can do
28:14 with it. Uh you can't put any property that you're currently consuming into it. So, you can't put your primary residence cuz you're living in it, you're consuming it. Um Excuse me, but you can put retirement savings, you can put cash, you can put rental property in it. You can you can put uh uh you know, depending on what they do, small companies in it. Um gold, uh other precious metals, crypto. Uh so, it's pretty versatile. Mhm. The one thing with it is is it needs to reasonably relate to your your your lifestyle. Mhm. Uh and and
28:49 what that basically means is if you're living today, say I've got an income and I'm making $250,000 a year and I have enough money put away in my my savings retirement that when I retire, I'm going to be making 500,000 a year. Well, court's going to look at that and go, well, you're living on 250 now, why are you going to need five when you retire? And it's going to expose that that that additional amount. So, you you you need to do a little math. We do this these these analytics before we set these things up. Give us an idea. This is what you have right now. This is how old you are. This is when you anticipate retiring. This is what you're going to need for retirement. This is how much we
29:25 can fund into the private retirement plan. So, if if you've got room after doing those analytics, it's really excellent planning. Yeah. Now, you you you had mentioned earlier that California no longer protects IRAs at all. Would this be a vehicle then to potentially protect that IRA? Or is that
29:43 >> Yeah. Yeah, you you can the 100%. You you you can it takes some It's not as easy as just retitling the IRA. The problem with IRAs is they're individual retirement accounts. They have to be owned by the individual. So when you when you start putting them in entities like that it's it's tricky and you have to navigate it just right. So for IRA protection that and even before even with in states where they they don't have the private retirement trust There are we call an IRA rescue. There's planning you can do for them. But again you got to be very careful
30:18 because with with qualified money and tax exempt or tax deferred money when when you retitle it it tends to trigger a tax result. So you got to be very careful with those. But but there are ways we can do it. Yeah. So I mean this is interesting because I know in my work where I'm administrating you know trusts and probates you know usually and I don't think I've ever seen a case where any kind of retirement account was put into the sort of typical inter vivos trust. It's always left outside. It may have a benefit a beneficiary on death designation which
30:54 means which means it can pass you know without going through probate. But I've never seen one you know in a trust. Now I'm sorry to interrupt but that's exactly why you nailed it on the head. They're they're not in the trust cuz at the end of the day the revocable living trust the foundational estate planning trust its purpose is to avoid probate. So with those retirement accounts because they do have beneficiary designations they they don't typically don't require any kind of probate. Right.
31:22 >> You know if you don't have a beneficiary designated or the persons or persons you designated have predeceased you and there's nobody there's no successor beneficiaries then the money can flow into the estate. But but you're not going to retitle it pre-death because it will trigger the tax. That's all. Yeah. And it is interesting because I was handling um the administration of a trust in Alabama on behalf of a widow and the financial institution at which her
31:58 husband's I think it was an IRA was was held they delayed so long in completing the paperwork to transfer it to her as the surviving spouse she ended up dying before that happened and the only way at that point we could correct it is we had to I had to file a probate in order to get a court order to now transfer the husband's IRA to the daughter because only the surviving spouse was the you know designated beneficiary on death. So
32:34 I mean these things they can become complex and you can do all the right things and yet the institutions will you know they don't do their job and and now you're uh So if you take nothing else away from from from this podcast uh take this away. If if you've got a revocable living trust and a a IRA or 401k at least name the trust as a contingent beneficiary. So if if that were the situation if that was the way things were rather than the situation you described so it named the beneficiary the beneficiary predeceased distribution
33:11 the contingent beneficiary is now a trust uh money from the retirement account's going to flow into this trust and be distributed pursuant to the terms of the trust. It would have avoided that that ancillary probate situation described. Interesting. Yeah. So okay so let's let's now go into some more of the the specifics of setting up a Cook Island trust cuz you mentioned the the the trust is cited in the Cook Islands but you've been saying well you know you the bank will be in
33:46 Switzerland. So talk about you know that sort of almost multiple jurisdiction aspect of it. Why is it why does it need to be that way or you know or why is it that way I guess. And and talk a little bit too about I mean you know for someone who's got I don't know $100,000 I would think that that kind of level of asset protection may not be appropriate because of the expense of setting it up but but but maybe I'm wrong. So kind of give us an idea of you know where does
34:24 someone need to be financially what do they need to have at risk I guess is really what it comes down to for these kinds of tools for them to start thinking maybe these are the kinds of tools my clients or you know I as the you know the the individual as the wealth need to be thinking about these more sophisticated you know planning tools. Got you. Yeah. So two very good questions. So let's start with the the location of the banks. Because the trust is in the Cook Islands the property need not necessarily be in
35:00 the Cook Islands. It it can be and and the Cook Islands for all its charms only has one private bank. It's a good one and and I like it and I use it a lot. But but having said that it's not for everybody and some people are just plain not comfortable with an island bank. I I get that. The Swiss banks have worldwide reputation and it's well deserved. They're very good. They're very well managed. They're very well run. They're very safe. So my my my requirement not my requirement my recommendation of course client can
35:35 do whatever whatever he or she wants but my recommendation is don't use an American bank. Don't use even a foreign bank with an American presence. Going back to the situation I described earlier you get a judgment against me and if I have my money at Bank of America you walk in you take your writ of execution to Bank of America Bank of America does not care that the the account is owned by a trust in the Cook Islands or Nevada or on Mars. It doesn't matter. They have a court order that says you have money for
36:10 this guy. You are ordered to hand it over to this other person. That's what they're going to do. My remedy like I said earlier is a motion to quash. When I go to my file my motion to quash and tell the judge in California hey judge you can't give them a writ of execution against that account. It's not owned by me. And of course like I said the court's going to say who is it owned who is it owned by and as long as it's a self-settled trust the trust I set up where I'm a beneficiary that the trust is in Nevada or Wyoming or South Dakota or the Cook Islands or Nevis or the BVI's or the it doesn't matter. I'm going to lose that money. So
36:48 my recommendation is always use a bank that just doesn't have an American presence. Um Americans are comfortable with Swiss banks. That's why we typically recommend them. Right. Um But you're not talking I'm I'm going to just interrupt real quick. You're not talking about like a UBS that has a major American presence. No we exactly. And and funny enough um UBS with all due respect love you even though I don't um
37:16 >> [laughter]
37:17 >> I'm going to give I'm going to give So I'm going to give them a free plug because I listen to a lot of business podcasts and Paul Donovan the chief economist for UBS funniest business podcast going. The guy is as droll as they come. Everything I everything I said about Swiss banks applies to UBS. They're a solid organization. Yeah. I get called on by their reps often and they swear upside down and inside out that their Swiss division is different than their American division and that the banking division is different than the wealth management division is different than this and different than that.
37:52 I I'm not comfortable UBS for the reason that you nailed it straight on. I think if someone showed up at UBS in downtown Los Angeles with a writ of execution they're going to come up with some money. That's what I think. Yeah. Um I I maybe I'm wrong but why even chance it?
38:08 >> I I should note that I did hear that UBS was thinking about sort of reflagging itself in the US. So Maybe that'll help. I don't know. I don't know if they care enough about the asset protection aspect in in in particular that they're that's going to make a difference to them. Yeah. Um but but to your point no a a a foreign bank that has a significant American presence I wouldn't use Okay.
38:32 >> at all. If I if I would recommend not. Okay. Um you know having said that there are lots of good banks that are not present in the United States. We we we use a number of a very good and old Swiss banks. Some of these banks are literally 100 plus years old. There there are good banks in in the United Arab Emirates. There are very good banks in Hong Kong and Singapore. Um Americans like American banks. They they they do but it's a big world out there and there are good banks in other places. Um there are other jurisdictions that are trying real hard kind of become part of this whole offshore world uh
39:07 uh Panama the Panamanian banks have kind of injected themselves in this. The the um Oh uh Oh god Basel where are they? I don't know any number of island banks. Mhm. I I like the Swiss banks. They're they're they're all like I said they're old. They're they're battle tested. They're professionally run and Americans are comfortable with them. When when someone comes in and and sees me and most of my clients are fairly wealthy and they've worked hard to get where they are. And I suggest to them you take the vast
39:43 majority of the money you've accumulated working your whole life and put it in this little island that you may have never even heard of and and put it in a bank on that island. You know, I get one of these, "You're You're kidding, right, Craig?" So, when when I when I say a a Swiss bank, they're a little more comfortable with it. Right. You mentioned Hong Kong. Does that Does that remain or I I Let me Let me rephrase question. How does, you know, what's happened in Hong I'm not looking to get in political discussion
40:09 >> Oh, no, no, no, no, no, no, I get it. How is what has happened in Hong Kong over the last few years changed its desirability as a place for We're talking mostly Americans, for Americans to, you know, park their wealth? I I changed it a lot. So, it it it it was You You caught me. I haven't used Hong Kong in years.
40:29 >> Oh, sorry. Okay. That wasn't what I was trying to do.
40:31 >> No, but but since the Chinese have taken over, I 100% agree. It did It is not as reliable as it once was. Okay. Um in my opinion. I you know, I cannot point to specific examples where there's been a problem. Um having said that, I would be hesitant since the Chinese takeover to use Hong Kong. And And really Singapore, I haven't used in a while either. Not because the Singa- the banks in Singapore aren't excellent. They are. Mhm. Uh [clears throat] the The problem with Singapore is it's just really really hard to onboard there. Mhm. It will take months and in all likelihood you will do a very long dance or courtship with them and it'll take 4 months for them to come back and
41:07 go, "Eh, you know what? We don't want you as a customer." And it it, you know, it it it's You've got to be this far from sainthood to to hook up with a a Singaporean bank. And then And it's not enough. They're going to ask you why you want to use this jurisdiction. And the answer can't be because I know your banks are great. I just trust you. With the Swiss, they're good with that. Where in Singapore, they're going to go, "Yeah, not good enough." Like you you you you need business in Asia to get into Singapore. Um So, that's why I use mostly Switzerland and Liechtenstein. And I'm probably with my American tongue I'm pronouncing that poorly, but Sounds like me.
41:42 >> [laughter]
41:43 >> Uh but but Switzerland and Liechtenstein are where the vast vast vast majority of my clients go and the rest of them will will will trust the island banks, which I I also trust. I I would say I would let my mother put her money in these island banks. Having said that, not everybody's comfortable with them. And And a lot of times they just they don't have the tech that the Swiss banks do. You know, you don't have the trading platform. You don't have the the the online access that you get with the Swiss banks. So, they they just don't have the the the bells and whistles, if you will. Right. Okay. I'm going to We're going to take another break and then I'm going to come back and uh we'll we'll we'll get the answer to the to the uh second question I had. Probate and Trust TV, your curated
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42:58 So, just to sort of refresh the the question, um you know, at what level of financial, I don't not ability, you know, financial wherewithal, if you will, does the the kind of estate planning and asset protection planning make sense? That That is a a different The answer to that question, I think, depends on a couple of things. Who you are and what you do,
43:33 I think, is is as important as anything. So, I like to use as an example, take a uh a a a C-suiter at a publicly traded company. That That person could be very very wealthy and and work for a company, Amazon, Google, General Motors, companies like that, that get sued literally 10 times a day somewhere on planet Earth. Having said all that, that person is not personally exposed, generally. There There may be some peculiar reason why they are named as a defendant. The
44:09 company's going to going to indemnify them. So, this kind of planning, while yeah, it's not terrible to protect you against a car accident or a slip and fall at the vacation home, really that's not the the the kind of protection You know, most people are going to have auto insurance for that. And yes, you can get over the the limit of your auto insurance and that does happen, but it's rare. Mhm. So, that that this is for more you're you're owning a manufacturing company and you put widgets into the stream of commerce and you get sued for
44:45 a a product's liability and all of a sudden there's a 3,000 member class and they're all suing you. Mhm. Uh wage and hour cases, you've got 100 employees and they're all suing you. Um It You know, it it it's for bigger losses, typically. It It Although, like I said, a car accident certainly is potentially dangerous. Right. Um but point being is, if you contrast that C-suiter with somebody who maybe owns a small manufacturing facility or 10 Subway restaurants or something like that,
45:21 the small business owner is going to be a lot more motivated, I would think, than the C-suiter. So, it's it's really more than what your bottom line net worth. And also, it makes a difference who your lawyer is. Um I worked at a law firm. They are wonderful. They are smart. They They They do great work. I would, again, trust my mother with them and I'm still very friendly with them. They're Are you friendly with your mother?
45:51 >> [laughter]
45:53 >> Different story altogether. But But they are they are uh probably four times more expensive than I am. Mhm. Um I'm a sole practitioner. My overhead's low. Uh and uh I I would think someone would have to have a lot more money to use them than to use me. Mhm. So, uh I will tell you the wheelhouse client is that entrepreneur. Mhm. That That small business owner. They're They you know, those are the people that are public-facing, that are out there every day, get up
46:28 every morning and flicker on the open for business sign, and and have clients coming and going, and and uh they're the ones who get sued and they're the ones who whose lifestyle could be impacted by a lawsuit personally. Mhm. You know, if if if Google gets Google gets hit by a a or a a Let's say Facebook or Meta, cuz I know who the the CEO is. And Meta gets hit with a giant suit, Mark Zuckerberg's life isn't going to change. Right. Um if if if the the man or woman that owns 10 Subways around Orange County gets hit with a massive
47:03 wage and hour, they're flying coach again when they're used to first class. And maybe their their retirement's going to be deferred 5 more years. Um so, that that person's going to be a lot more motivated and and probably have a a greater need for it. Mhm.
47:18 >> [clears throat]
47:18 >> And And um what kind of um time process is there to do this kind of work? I don't imagine someone walks into your office and by the end of the week, you know, hey, it's all set up and and, you know, we're we're we're good to go. I'm protected now. Uh cuz I I I think like all estate planning people tend to sort of, "Uh yeah, I know I need to do it. I'll I'll take care of it. I'll take care of it, right?" And then, you know, they delay, they delay, they delay, um and then, you know, something happens and now they're
47:54 you know, that kind of thing. So. Uh [clears throat] Yeah, no, you're right. It It is not something that happens overnight. And And believe it or not, depending on my workload, I can do the documents for you fairly quick. Um you know, if I've got five of them lined up, it may take me a minute or two, but you know, if I've got one or two that I got to do and you walk in, I can usually get the documents out to you in a in a in a week or two. Um once the documents are are done and we get them signed off, they have to be submitted to a a third-party fiduciary. Someone If we're
48:29 going to do a Cook Island trust, for instance, one of the trust companies like the one I used to work for, Mhm. has to be the trustee. So, they they've got their international requirements, but they're their KYC, know your customer, and due diligence. And they need to make sure that They're going to run a background check on you and they're going to make sure that you're not you're not ducking an open lawsuit. They're going to make sure you're not a drug dealer and you didn't get your money cuz uh you're you're a you're a a diamond thief or that you're not in Al-Qaeda or you're laundering money for them. So, they they they've got a They've They've got to They've got to do a background check. Yeah. The the the harder part, believe
49:05 it or not, the bottleneck is typically going to be those Swiss banks. Mhm. For all [clears throat] the kind things I said about them, now I'm going to I'm going to tell you the the downside. Getting the accounts open is is hard. I mean, you got to be this far from from sainthood to get an an an account open with the Swiss bank sometimes. And And that could be a a one and one and a half month process. I I've seen it go two and three months, depending if you know, if there are any issues. And And the issues are you'd be just shocked what sometimes concerns them. I'll get a call, "Hey, we did a background check on your client and we found out they got a DWI in 1997.
49:43 Why didn't they tell us? You know, they give you the forms you fill out. Right.
49:47 >> Well, because it's only a DWI and I'm not to diminish the severity of those, but it was you know, they they didn't kill anybody. And it was 1997. What what do you want from them? You know, it was So, They probably forgot it. That that that's the sort of thing that that, you know, it hasn't been relevant in their lives for 20 years. That's why. Um So, that that that is um the sort of detail that they're going to kind of put you through. What Now, what once you get on board it, oh god, making a mess over here. Well, once you get on board it it it working with them is a pleasure. But but getting
50:23 to that point is uh is sometimes a um
50:26 >> [snorts]
50:26 >> journey. And uh so, that that's usually the the the the bottleneck when it comes. So, that the short answer to your question uh you come in, we have a meeting, you like what I have to say, and you go, "Yeah, that's brilliant. I definitely want to do one of those." Uh from the day you you you give me the thumbs up to the day you're actually wiring money to your Swiss account, it could be 2 months, 3 months. I mean, it's it it doesn't happen overnight. But we I mean, that's a a a you know, if if all the planets line up right, it it could be 5 or 6 weeks, but it's it's it's rare that it goes that fast. Yeah. So, I I guess just like any
51:01 trust, getting the trust itself set up is actually pretty quick. It's funding the trust that Right, because that's the the the the time factor there.
51:12 >> Yes. And and yet to be clear, the trust cannot do anything for you as to assets it does not own. So, yes, that process of getting the assets you want protected retitled to where the the trust owns them is is sometimes a difficult part. And by sometimes I mean always. Right. Now, so you mentioned um that you know, the the the fi- fiduciary, the Cook Islands fiduciary, he'll look to see if there are pending lawsuits, that kind of thing. So, let's just take an example where for whatever reason um maybe it wasn't disclosed to you um or let's say it wasn't disclosed to
51:48 you, and they and the Cook Islands trust didn't find it, um and now the Cook Islands trust is is set up, it's funded, and then it turns out that indeed there was a lawsuit going on at the time that work was done. Uh you know, how how might that affect the ability of the trust to protect the property owner? I mean, would that be considered a fraudulent transfer, for example, uh you know, and and and then, you know, you know, of course, like you said, the you know, an American court can issue
52:24 whatever kind of order or writ it wants, but but, you know, how will then the you know, the the uh Islands based fiduciary, you know, view that? So, the You mentioned [clears throat] fraudulent avoidable transfer. So, that that is definitely what you're talking about. It to the extent these trusts have kryptonite, it's that. Uh and and what that is is you you can't set one of these up to avoid a particular claim. If you know you have a creditor that's coming at you, you can't have a car accident today and go, "Oh god, this guy's going to sue me." and go settle
52:59 one of these things tomorrow. That's bad. Now, if if you settled it 2 days ago and and you have the accident today, you're generally going to be protected in under the fraudulent avoidable transfer statutes of of most states, California not being one of them. Talk about that in a second. Um cuz you didn't set it up to avoid a specific claim. Mhm. Um by the way, this is also one of the things that that that separates jurisdictions from one another. What what one jurisdiction could be considered better for this than another,
53:35 and then it's it's how they view avoidable and fraudulent transfer. Um but the answer to your question is if there's a pending claim, the trust company will find it when they do their background check, and they will refuse to onboard you. So, it is rare that the the the trust company's going to get blindsided by by uh oh, we just we just formed this trust and and uh now here's this creditor knocking on our door going, "All right, we got a judgment against this guy." Um So, lesson in that, the the you've got to be proactive. Don't don't wait till you're in trouble to set one of these things up. Right. Um
54:11 uh having said that, different jurisdictions have different definitions of avoidable transfer. So, the Cook Islands on the Cook Islands, if you set up the structure prior to an event giving rise to a claim, it is it is de facto just deemed to be not fraudulent. So, going back to the example I gave, if I set up my trust today and I have a car accident next week, under Cook Islands law, it will never be fraudulent or avoidable. California's a different story. California looks at it, and they say any any entity that's set up specifically to
54:46 a protect you from creditors, even if the event giving rise to the claim hasn't occurred yet, uh could be voidable for 4 years. So, if I set one up today in California, and I have an accident 2 years from now, as far as California's concerned, it could still theoretically be be a avoidable transfer. Um That's another reason we don't we're we're we want to go offshore because it doesn't matter what California says at that point. Right.
55:15 >> As soon as as soon as your property's 15 miles past US territorial waters, California can say whatever it wants, it doesn't matter. Um I shouldn't say it doesn't matter, but it it it certainly
55:25 >> practical nature.
55:27 >> You're still going to be protected. But the answer to your question is if you can somehow navigate the voidable transfer statute, even in a jurisdiction like the Cook Islands, where the voidable statute is written as narrowly as it possibly and practically could be without being ridiculous, Mhm. uh the the trustee will will will pay the creditor. Mhm. But [clears throat] so, let me do the worth mentioning. So, what is it in the Cook Islands or or again, the top-tier jurisdictions for this kind of planning versus uh even the the middling jurisdictions or the downright bad jurisdictions like California? Cook Islands, like I said, it is it is
56:05 Anything that that happens after the structure's created or funded, funding is actually the date we're looking at. Mhm. Uh is if if you fund your trust before an event giving rise to a claim occurs, deemed not fraudulent, period, full stop. Uh if the event somehow you you slip it by and and an event occurred prior to settling the trust, under Cook Islands law, you have to have a suit filed in a court of competent jurisdiction within a year of the event. Okay? So, if I commit a tort today that
56:43 potentially makes me liable, and I wait a year and a day, and I've not been sued yet, under Cook Islands law, it is deemed no longer fraudulent. We've waited long enough. If I do get sued within that year, then you need to be in the Cook Islands. You you you cannot make that claim in any other jurisdiction. So, if if I'm get sued here in California, and the plaintiff says, "And oh, by the way, he set up that Cook Islands trust, and it was voidable transfer under their law." That doesn't matter. You need to go to the Cook Islands within 2 years of the
57:18 date giving rise to the or the incident giving rise to the claim. Um Even if I get I get So, you and I were were were talking prior to the to this this podcast, and you were mentioning a a litigation that had carried on for a number of years, and we would comment, "God, I can't believe how long litigation takes in California." Right. It ain't no suit done in in in that state in 2 years. It just not. You know? [laughter] Yeah. Yeah.
57:45 >> So, if if if I have a car accident today, and somebody sues me in California tomorrow, it is not going to be done in 2 years. Right. So, uh it's very difficult to to make that those time windows. If somehow you were able to make maneuver within those time limitations, the claim for fraudulent transfer has to be brought in the Cook Islands. Um which is not an easy place to get, quite frankly. There is no direct flights there from the USA. There used to be one prior to COVID. There was one flight a week from Los Angeles into Rarotonga. That that flight no longer
58:20 exists. The only flight from the United States at all is from Honolulu. Um you can get there from Guam, which is a US territory, I guess. Uh most of the flights, if you need to get there on on any day of the week that isn't the one day a week for your Hawaiian or Guam flight, you can get there any day from Auckland or from from Sydney. And that's a miserable flight. You've got to overfly the Cook Islands to get to Auckland from Los Angeles is about 14 hours, and then you got to kick 4 hours back to the Cook Islands. So, it's not an easy place to get. Right. The lawyers are by and large going to be conflicted with the trust companies, uh the lawyers there. And there are good lawyers there. But they're going to be
58:55 conflicted out. So, what most people would have to do is get a lawyer admitted to the Cook Islands Law Society uh that doesn't live there. And where do those people exist? In New Zealand. So, you're going to go hire an attorney in New Zealand. New Zealand lawyers are not allowed to work on contingency. They are ethically prohibited from doing it. So, you're going to have to give this lawyer a big retainer. And oh, by the way, a lot of people Americans have not heard of of of the Cook Islands or Rarotonga. And I lived in New Zealand. Uh New Zealand, everybody knows where they are. To to to Kiwis, the Cook Islands are like Hawaii is to us. It's where they go for a Polynesian vacation.
59:30 Okay. So, you're going to go to this New Zealand lawyer, and you're going to say, "I'm going to give you a big retainer to take a Polynesian vacation on my expense." which they would be thrilled to do. Um and and go there and get your butt handed to you because you're climbing uphill trying to navigate these these narrow time windows. And oh, by the way, when you get there, here's the standard of proof. You have to show beyond reasonable doubt that the structure was set up to defeat you, the plaintiff. Beyond reasonable [clears throat] doubt is the highest criminal standard. Mhm. So, it's very difficult standard to hit under any circumstances. So, you need Now, how you
60:06 going to show that? How you going to show that the structure wasn't set up to to protect from creditors generally? Like in California, that's what you need to show. Uh preponderance of evidence that it was set up to protect you from creditors. Uh Cook Islands, you got to show beyond reasonable doubt that it was set up to defeat your claim. Mhm. So, you will need an email that you got in discovery or or someone to admit in in a a deposition. Yeah, Kevin thinks I owe him money. I'm going to show him. I'm going to go set up this structure and he's not going to get a dime from me. That's not going to exist. Right.
60:38 >> Um And if it does, you're you're not going to find it in the short time window that that you've got. So, it's an extremely difficult statute to navigate. So, the answer to your question is if I can't do all of those things. If I can't get there in that short time window and prove beyond reasonable doubt the structure was set up to defeat me, I Once your money's offshore, it's pretty safe. I've never and I've been doing this a long time now. I've been I've been associated with the Cook Islands. Um for for a a a long time now. And I And
61:13 again, as general counsel of this trust company where we managed thousands of these things, I saw dozens of challenges to them, which is something I have not seen here. I've seen one or two since I've been back with my clients where they were challenged. And by the way, they always held up. But as as general counsel over there, I saw dozens and they all held up for all these various reasons. Um it's really really difficult to bust one. Yeah. Well, I I would love I I have some follow-up questions, but unfortunately, we're we're actually a little bit past an hour, so um I'm I'm going to have to have you back again. Hopefully sooner than than the the last gap. But I Craig,
61:50 this is this this is so fascinating. And I I I I think that, you know, for the people watching and listening, um this this is there's so much meat here to dig into, especially especially for entrepreneurs, as you say, where worked hard all their lives, built a business, and and, you know, in a litigious society the litigious society in which we live, it's it's, you know, could really be at stake.
62:13 >> that that's the real house. If you're an entrepreneur, you should strongly consider If you're making money, you should strongly consider this kind of planning. Very good. Well, so so Craig, thank you so much for coming on the show today. I'll have you hang tight. I'm just going to do a quick wrap up quick wrap up. For those of you who are interested in talking to Craig about the kind of asset protection he can provide to you or or set up for you, I think is probably a better word. I'll put Craig's contact information in the show notes when the show posts on YouTube. And and and you
62:48 know, obviously feel free to get in touch with him directly. So, let's see. Tomorrow at 10:00 a.m. is my show Business Lessons from the Military. That's 10:00 a.m. Pacific Time. On Wednesday at 10:00 a.m. is my show People Making Money. And And then Thursday at 5:00 p.m. is my show Jiggers' Place. Not business oriented. We're just going to have We have a cocktail and a schmooze. Talk about all the non-business related things. So, I thank you so much for joining me today. And and for joining
63:23 actually Craig and me today. I know you got a lot of good food for thought there. And if you have questions, comments, criticisms, again, links to my social media will be in the show notes. Feel free to post those. Always happy to respond. And that just leaves me to sign off as I always do. Marie darling, you are my Val. Courage at all times.