0:00 who are you and where are you going what do you [Music] want hello and welcome to trust and Estates weekly I'm your host Kevin bemel and we are here every Monday at 10: a.m. Pacific time to talk about all of those matters relating to estate planning trust and estate Administration both from your
0:37 perspective perhaps as an individual who is dealing with this process but also from the standpoint of people like my guest and me who are professionals that help people you know with with their estate plans and with the administration thereof so I'm I'm very excited uh today to have Craig redler as my guest Craig is is attorney in practicing out of Newport Beach California um one of the most beautiful places here in Southern California and I'm not going to spend a lot of time on his background because I really want you to uh to hear uh what
1:14 what Craig has to say and so so first of all Craig welcome thanks for coming on the show I really appreciate you having me love talking about this stuff oh good good so so Craig if if you don't mind let's just start out give us a few minutes um about your background how did you um you we you were mentioning before we went live that you used to do radio and so you know curious how you went from that to you know to being becoming an attorney and and especially to the area of practice that you in which you specialize oh God it was a really long
1:50 and believe it or not not extraordinarily straight path but but uh here I'll try and try and keep it brief to the to the best uh to to the extent I can uh I started out in law practice as a litigator believe it or not so I I worked for a defense oriented uh law firm in St Louis Missouri which is also where I went to law school and I boy I I would say this anybody any aspiring attorneys you you should litigate at least a little bit at the end of the day even if you're that's not your passion it's just a a good skill set to have because everything else we do
2:25 ultimately how to avoid litigation how to put your client in the best position to protect them from litigation or or uh you litigation drives a lot of what I'm doing even to this day even though I haven't been to a courtroom in a very long time M so I'm a litigator I had a friend from law school who who uh we're having lunch and he said do you do any estate planning and I said no I I don't and he said well that's too bad I just joined a financial advisory firm we were looking up to set up a a network of estate planning lawyers and it's a lot of business anyway let's order lunch I'm like well wait a minute how much is a lot of business and and it it turns out
3:01 it it was a lot so I said well I'm I'm willing to train up if you're willing to work with me and because I was good friends with this guy he said all right let's see what you can do and I grabbed another lawyer at the firm I was at and we started our own business and we crash course on aate planning we took every course we could it so happened his father was the probate judge in St Louis County so you can rely on on the legal department there so it it um we it was a lot of business so he he was sending us God 20 to 30 cases a month which is a lot and pretty much
3:36 huge am yeah so we got very good I I just out of the sheer volume couldn't couldn't help ourselves I thought uh and and this was really it was just the two of us and we we staffed up we got paral leals and and uh we did nothing but service the referrals from this one referral source for better part of two years and then the same guy came back and said uh boy uh they were in about 14 States the time they said you know we're just not profitable uh as much as we want to be in the state of Missouri with our financial advising services so we're we're probably going to not be doing a lot of business in Missouri moving forward so we had our our primary source
4:14 dare I say our only source of business kind of pulled out from under us so we we started um you know neither of us had done me and the other lawyer had not done a ton about developing other business sources so we started doing stuff that probably had no business doing and really didn't want to do we were doing like divorces and DWIs and things like that which were not particularly challenging but we were both very unhappy with it and uh he ended up taking he said I just can't stand this anymore and he ended up going inhouse with an insurance company and I soldiered on for a couple months and it
4:50 was just impossible existence doing doing stuff like that so I and I'd saw a I'd seen a classified ad for being general counsel at a at a Trust Company um this Trust Company happened to be in on a little island in the South Pacific called raratonga in the Cook Islands so I talked to them and they they said come on out and I actually worked in the Cook Islands for almost two years as general counseled a company called southpack trust um southpac had two offices at the time they had one in in the Cook Islands had
5:26 another one over in the Caribbean on a little island called neas and open a third one and they said uh would you go open this this new office for us that new office was in Tanga New Zealand so I moved from ratanga Cook Islands to Tanga New Zealand um and opened an office the third office for South pack trust I worked there for about a year and a half and actually was doing a case with another trust company called Amic Corp where we were co- trustees and uh that Ami Corp uh the lawyer I was working
6:03 with there uh said I don't know when this case is whining up she said I'm about to go on maternity leave and she said my managing director really liked working with you he he said ask you if you're interested in coming over here so I talked to them and was in Auckland and I was interested in getting to a bigger city and interested and it was a much better pay so I jumped over to Ami Corp in Auckland New Zealand which uh in hindsight kind of wish I hadn't because it it um every offshore jurisdiction
6:39 they all have a niche right you would go to the Bahamas for this BV for that Cayman for this Cook Islands and neas of course for credit or protection for Americans so the sort of planning we were doing in New Zealand was completely different it was for ultra high netw worth Latin American families so I don't know if if you personally recall something the Panama papers that ringing any your bell yeah it does I couldn't tell you what it was it was a data leak and it wasn't really a data leak it was a disgruntled employee at a at a law firm in Panama called MK cono if I recall and this person just handed over all their firm's records to something called the ICI the
7:15 international Consortium of international journalists who just published it it it's still out there you can Google ICI data leak Panama papers and and it just showed every structure this firm had set up all over the world which just my little I don't want to waste too much time on this but but just my my my editorializing on that there was no allegations anybody was doing anything illegal it wasn't like this family was not paying taxes or this family is laundering money it was just like rich people have these things and we all know how rich people are right you know and and uh really no different than if
7:51 someone went to any you know wherever anybody listening to this is sitting there's probably a Bank of America within a couple blocks someone walked into that local Bank of America ripped hard drive out of one of the computers and just published everybody had an account for no particular reason right and and that's that's kind of what happened but anyway uh new New Zealand was servicing by and large these ultra high net worth uh Latin American clients and they were not again you go to the different jurisdictions for different niches and what they were looking for it wasn't creditor protection lawsuits weren't a problem for these people what what they were looking for was two things one was
8:27 privacy uh if you were an ultra high net worth uh uh South American family or Mexican family kidnapping is a big deal down there so that is honestly a real thing so they don't want how much money they have and to the extent that it it gets out they have some money they want it known you kidnap me you're not going to get any right uh because these trustees aren't going to pay so do you want money or do you want to do you want to kill somebody if you're you know go go go go uh somewhere else if you're looking for money and the other thing they were looking for is tax deferral so unlike the United States where Americans we get tax dollar one day one if I earn
9:03 a dollar anywhere doing anything I owe money to the federal government and I owe money to whatever state I happen to reside in um most of the rest of the world it doesn't work that way if if you earn money away from your jurisdiction you don't pay the jurisdiction you're in so if you're an ultra high net worth Argentinian uh and you've got a company in in say Hong Kong and it's owned by a New Zealand trust and earns $100,000 this year you're not going to owe any tax to the government of Argentina unless or until you bring it home so now you've got another $100,000 to roll over and you can see where the compounding
9:38 would be would be much better we Kevin F few and I were doing that doesn't matter if we had a Hong Kong company owned by New Zealand trust we earn $100,000 we're going to clip it almost 40% depending on where we live to pay the federal government and and the state government so that that's what they were looking for totally totally different kind of planning but when the Panama papers papers broke so New Zealand back up a little bit it is a super clean jurisdiction by the way most of these foreign jurisdictions are and that's contrary to popular belief most people see the the Jolly Roger when they think offshore but I I'm telling you they a lot of them run
10:13 very tight very clean uh uh uh businesses uh but New Zealand is one of the tightest and cleanest if if you were to get like Google right now the the least uh corrupt countries in the world New Zealand would be top two or three on every list wow going back a hundred years so so interesting the the the South Americans wouldn't use the island jurisdictions because they weren't as clean and their governments would look at if you if you were that Ultra Rich Argentinian I was talking about and instead of setting up in New Zealand you went to some place like the Bahamas or
10:49 the bbis uh government of Argentina would say I don't know what you're doing there but we don't like the jurisdiction so we're just going to tax you 20% just C so they they didn't do that with New Zealand so that's why they used New Zealand New Zealand didn't have particularly good trust laws it was just just a codified common law like I I could tell you like in the Cook Islands their trust statute is really magnificent where the New Zealand statute it's been updated since I left was kind of average but that that's not why they they were using the jurisdiction the clients that went there were looking for those two things privacy and and um just again that it was a clean white label jurisdiction
11:24 right and for tax deferral so anyway when New Zealand again which runs this clean ship and I'm sorry I've taken too much time on this no no not at all not at all this they they when they were lumped in with the Bahamas and pvis and came into the world uh when the the Panama papers broke they they were not extraordinarily happy about that so they basically legislated away their their industry so the New Zealand trust industry it was June 2017 or thereabouts when new laws were enacted literally lost about 75% of its business overnight
11:59 and then that was quite intentional so my company was one of those and they just when I started at Ami Corp in Auckland there were about 25 employees there when I left there down about 12 and they're still there I think they're two or three right now wow so they they came to me and said look you're an American we just lost all this business will you go to one of our American offices and uh they transferred me from Auckland to Miami Florida so I moved to the Ami Corp office in Miami Florida when I hit the ground in Miami I sent out emails to people I've been working with over the years hey people I've been working with over the years back in the
12:34 United States living in Miami here's what I'm doing if if you interested in in uh you get this direction give me a call we can go get coffee or whatever and uh one of the people I reached out to as a lawyer here in Orange County California and uh he called and said hey I always lik working with he used to send a lot of business to the Cook Islands I always lik working with you when you were in the cooks are you interested in getting back in private practice and that's how I found my way out here so it it was a yeah a most indirect path yeah um very good experience as far I am to this day the only lawyer in the United States that's ever lived and worked in the Cook Islands in this industry and why is that
13:11 important if you an American and you were interested in protecting your assets from being lost in litigation um there's no better place to do it in than the coke islands and just by way of foundation uh if I were to to uh sue you Kevin and I were to get a judgment against you I could get what's called a rid of execution M you know unless you whip out your checkbook and pay me right away right I can get this order from the court I can go to wherever it is you Bank wherever it is you have a broker I can take this rid of execution say you just have a cash account at Bank of America or something
13:47 could walk in there at this RIT and I can take your money really that simple what the planning I'm doing now is to is designed to prevent that it is it is a a ethic and legal way just to to make sure that never happens if we we were to take that same money that's sitting in Bank of America that's vulnerable to judgment and I were to take it and put it in a bank that does not have a presence in the United States and these are good Banks where we're going to go to Switzerland or Germany or somewhere like that and and uh take that same account rather than have it owned in your own name it's owned by a trust and a a a good jurisdiction a top tier protective
14:23 jurisdiction like the Cook Islands or neas that'll never happen I can get all the rits of execution I want so so and and just staying on that point for just a moment you know here in like California where um I started out Life as a law clerk so one of my jobs was if we were if we were pursuing on behalf of a client you know whatever it was a civil civil suit and if we had a reasonable enough likelihood that we were going to Prevail we also might look to put a rid of attachment on the um you
15:00 know the assets of the person we suing which of course that's a whole another thing because that ties them up right so with respect to a trust in the Cook Islands or Nas I would think that again the rid of attachment would mean nothing because they wouldn't recognize the jurisdiction of of in in this example the California courts correct correct and under cook Island law and it works the same way they are forbidden from recognizing foreign process in any manner so to the extent you try to to you know list pens or something like that or some kind of RIT
15:37 against property prejudgment it would be equally ineffective which is why it's a good time to mention it's important to do this kind of planning prior to any kind of loss or any kind of claim rather uh you can't do it after if I sue you today you can't go set one of these up tomorrow that that's going to be a fraudulent transfer however flip the the page you set one up today you commit a Tor breach a contract whatever it is you've allegedly done tomorrow theoretically you're okay so so talk to us about um some of the mechanics if you would um I mean I
16:14 did a little bit of research about Cook Islands trust you know I so I now know enough to be you know really dangerous right but but take us through some some of the mechanics so so people can understand how does this work what what is involved sure okay so the the the trust itself generically and and some legal gobbly G it is a discretionary irrevocable uh or an irrevocable discretionary not uh self-settled trust all right so that that is the nature of the trust so that the the important two
16:49 important terms in there is irrevocable and and uh discretionary and that's that's going to differ pretty much from most of the trust most people are going to be familiar with with so most people are in the United States are familiar with these revocable living trusts right all right and that's just a basic estate planning tool that anybody that owns anything ought to really really really be con consider doing if you haven't done that uh it's just probate avoidance and it it saves a family a lot of trouble and a lot of expense when someone dies or someone becomes disabled so these trusts they do check a couple of those boxes but that's not not really their purpose but so let's first start
17:25 with irrevocable versus revocable revocable living trust as the name are are imminently alterable revocable easy to change an irrevocable trust and that scares some people is theoretically not but I I would I would suggest to you that that's just kind of uh it is not an absolute an irrevocable trust is far from irrevocable it it it just requires additional steps and this depends on how it's drafted but but they're they're different in that respect they're harder to change but but certainly are are alterable uh under almost any
18:02 circumstances but but different conversation for a different day so it's an IR evocable trust a discretionary trust so what that means is you have to give the trustee absolute discretion to do what it wants which is also scary for most people uh if if and by the way you you have to hire a professional trustee in the jurisdiction where we where we set these up so if it's a cook Island trust you're going to need a trustee in the Cook Islands which also will will scare uh a lot of Americans we we don't trust people in other countries by and large and certainly not on a little island in the
18:37 middle of nowhere that a lot of us have never even heard of where they're literally in the business of not getting sued you know what do I do if this trustee disappears so right th those are are some hurdles but but we'll get to that in a sec but but back to the differences so you you you can never say trustee I need money for a new car give it to me all right you have to say trustee I understand I can't force you to do anything but in your discretion would you please consider buying me a new car or sending me money because I need a new car all right um I I will tell you that these trustees understand their their their
19:14 role here they they will very seldom come back without a very good reason and say no we like the car you have we're not going to buy a new car uh you know some sometimes TR sometimes trustees are asked to do that I've had multiple you know over the I've been doing this for for decades now and it's certainly not unusual when a family will come in and say look we have three kids and two of them we we trust we have no problem with the third one love him to death but he's just not the brightest uh Brightest Bulb in the box and and we don't necessarily trust him with with unfederated access to to cash he's going to go out and do something to hurt himself um these trustees unless we ask
19:52 them to do that they understand that's not their role their role is to stand between you and your creditors uh so they will will by and large do anything you ask them to do with two exceptions and the two exceptions would be if you ask them to do something that is that is completely and ridiculously Beyond any any realm of fiduciary duty uh thinking of an example hey trustee I need all the money in the trust because I want to finance my own trip to Mars you know they're probably not going to do that uh Hey trustee can I have some money I want to buy a a a truck full of cocaine and take my
20:27 friends to Las Vegas you know they're they're probably not going to do that but but short of something completely over the line Beyond fiduciary duty uh anything reasonable you know I need money to buy a car I need money to remodel my kitchen I need money you know whatever it is I want to invest in a new business they're they're not going to tell you no uh on on the off chance that they do there's actually back door control and then talk about that if you'd like to but if someone I can put anybody's mind at ease and and assure them that that they're not going to be shut out of their own money even though if you read just the document straight away it may may at first glance read that way the
21:02 other thing they're not going to do and this is where it's important is they're not going to do anything that you are asked to do under duress so hey trustee I need some money so I can pay this judgment that just got entered against me well they're going to take that as immediately you're under duress the court is making you do that nobody wants to pay a judgment uh they're only going to do it because somebody's trying to make them that's duress it's the definition so they're they're they're not going to do that so those are the two times are going to tell you no um but but that's a little unsettling just having to call and ask permission to use your own money now
21:38 with respect to the discretion that the trustee has um how how much um direction if you will to which the trustee would have to adhere can be put in the trust document itself you can put as much as you want okay it is you can you can you can 100% micromanage just like you with a revocable living trust which a lot of people do you know dear you know trustee I'm I'm the trustee why I'm alive and healthy and the second I can't do it my successor trustee you are instructed to
22:13 do ABCD and it's usually something like award everything to my surviving spouse If my spouse doesn't survive me separate shares for my kids whatever it is you you can put all that in I would advise anyone don't do that um the way the way because the problem is if if trusty has no discretion and you say all right when I die at at when my kid eats hits the age of 25 give him a million dollars or give him the the balance of the trust or give him an income of $100,000 a year whatever it is now his or her creditors can intercept that the trustee has no choice at that
22:49 point right so what I would always do the way we we we uh let the trustee know what it is we want to do is we send them precatory letters of wishes and the letter that's we just call letter of wish and call it any number of things but it's it's a letter outside of the trust itself that says what I what I mentioned earlier dear trustee I know I can't force you to do this but it sure would be swell if you'd consider doing the following and and I will tell you that they will almost always do it except for those couple of exceptions so if you say it would be my my my wish that you you you give my adult children $100,000 a year income uh you don't even have to specify
23:26 you know unless they're under duress um it's kind of built into the sauce and and presumably the beneficiary will let them know too well look this year why don't you just hold my 100,000 because if you give it to me this creditor is going to take it or I'm gonna lose it in this divorce proceeding I'm in the middle of with my my my my uh my spouse you know there any number of reasons maybe you don't want the distribution um or you know the better plan in in in my opinion is leave it alone the these trusts are you know when we set them up it's pretty typical for a family and and it's
24:02 uh you know Mom and Dad will come in and say we want we want to do this and we set it up and initially the beneficiaries unlike with a revocable living trust where the beneficiaries are typically going to be the set Lords we we make it everybody in the family so it's Mom dad you know the two or three kids whoever it is um and again the trustee just just knows that why the setor the people that created the trust are alive they're ultimately going to be giving direction and and don't necessarily take direction from you know an 18-year-old kid they're they're not gonna but what what happens there so we've got say two kids mom and dad so
24:38 there's got four beneficiaries when we settle the trust I sign it put some money in my bank account and now I've got four beneficiaries dad dies dad's typically the first one to go dad dies it's a non-event as far as the trust is concerned the trust just keeps plugging along and instead of four beneficiaries now it's got three MH and and we usually write them to where it's it's the beneficiaries are initially the family and then uh the airs down the line so you sometimes you hear the term Dynasty trust so these things there's enough
25:14 money in them they literally can can go on for Generations if that's how you want it to be now you you can specify I'm not worried about my kids liability uh uh when the settlers die distribute and here's who you distribute to and here's how distribute or sometimes the kids come along and go yeah dad was in kind of a business where he he he uh uh manufactured something and he had was always worried about products liability well I'm not in that business I I just work as a metal manager at at at this publicly traded company I don't have a lot of personal liability so I don't need the trust anymore can you dist distribute it all
25:49 out to me and and the trustee would do that under those circumstances so the answer to your question is you absolutely can do it I just typically unless there's a very good reason don't I mean it is interesting because in that respect typically here in the states when somebody creates a trust they're creating it with the broadest amount of discretion for the trustees because that really allows the trust to be as effective e even even in an estate planning uh you know situation um where you know um protection from
26:26 credit isn't isn't particularly the issue um you know trustees are given a broad broad discretion and and that typically works out the best for the people involved yeah and and that's exactly right but the the difference there is when I set up the um the the revocable living trust I'm G to make myself the trustee so I want to give myself my so it's it's it's still a different mindset but but you're 100% right that's even even the successor trustees be end up having that discretion right so then once the settlers pass away and and now the trust
27:03 is is is irrevocable um and there's some sort of successor trustee has stepped in typically they're they're keeping pretty broad discretion as well I agree with that so um you mentioned that um these you know Cook Islands trust or or neas it'll have to be a local trustee I assume it's a Trust Company typically a lawyer someone right or a lawyer so um talk if you would about um you know the amount of assets one would you know need
27:40 to have in order for this to be an economically efficient means of asset protection and and what are kind of the the the scope of the administrative costs necessary to to maintain the trust very great question and the answer is this it it depends on who you are and what you do and believe it or not who your lawyer is honestly uh the the obviously you you need some assets that are worth protecting before you're going to bother with this so typically the people that do it are are high net worth um but not
28:19 exclusively it it depends again on what you do so picture two two clients two typical let's stick with high net worth but not ultra high net worth comfortable people that are very comfortable say it's it's uh two two clients that both have a balance sheet that has say at the bottom line $10 million just keep it an easy figure to remember so that's pretty comfortable person but but not someone with a hundred million right um and say client one is a CEO or a CFO at a publicly traded company so that person makes pretty good money he's got a good
28:54 salary uh incentives and bonuses and things like that and retirement plans and they've they've managed to put away $10 million that person still does not have a ton of professional exposure publicly traded companies get sued and they get sued a lot but the executives are not going to be named I mean literately if you Google or Amazon or General Motors or Ford probably going to get sued somewhere on the planet multiple times a day and that's that's probably not an exaggeration right but you're usually not going to name the EXA IES and to the extent you name one of them personally
29:30 company's going to indemnify them so there there's normal Insurance yeah exactly but but there's normal losses they have to worry about but a lot of this planning it's not for car accidents look I you have auto insurance for that and yeah it is possible to to do exceed the value of your your auto insurance it doesn't happen a lot but but you know maybe you consider it for for that rare situation and you own in a vacation home and or someone Hur themselves on it or rental property or something like that so you know they're they may still want to do this but they're not going to be as motivated let's contrast them with
30:05 with client B here same $10 million bottom line but this person isn't an executive at a publicly traded company he or she owns a uh chain of restaurants or a manufacturing facility um has employees I always bring that up if you've got 50 employees that work for you and in my world there 50 potential Plains I mentioned earlier you manufact or something every widget you put on a store shelf is a potential products liability case right you own a chain of restaurants food poisoning someone gets hurt on the premises you've got problems with landlord suppliers there's any number of of of of of risks
30:42 in running a small business so that person's going to be a lot more motivated I think to do the kind of planning than than than the CEO CFO but but uh you know having said that I've I've done work for people that that um don't have near that much money but in kind of the buildout stage um and and they're high-profile and it's it's uh you know something that the growth is right in front of them and they see it coming so it's it's it's um uh planning in advance so but typically my my typical
31:17 wheelhouse client is going to be that small business owner that that client B I talked about just a minute ago and then we do athletes and entertainers and other other high-profile you know you're athlete you you're 23 years old everybody knows youve got millions you go to a bar and hey you think you're tough you know they want to you tap them at a red light you get out of your Bentley and they're like oh this guy plays for the Lakers I'm gonna I'm gonna nail him you know right right so and and in in a take that business owner then does is is his business um uh put into the the Cook Islands trust to
31:52 protect it it it depends on how the business is structured so that's another thing we we do the acronym I use is a faap is a foreign asset protection trust so we do something called an EAP which is an entity fap so we can do the planning for the business also the business itself um and and by the way for asset protection planning just to be clear it's not 100% forign trust that that's just one tool in in a in a fairly broad toolbox these days it is it is the best gold standard kind of planning for for liquid assets really can't do any better um but there are other assets
32:29 that just are inappropriate for a for a fact but but to your to your question yeah look if the shares of a small business have value and it's something that would be of value to somebody who's trying to see you then then absolutely we can run the business through the fact um flip side of that is your the business itself is out conducting business and and client facing which most of them are uh we can put its assets in in an EAP like I mentioned if businesses that hold cash or if you've got a business that's got a a fleet of trucks or anything else that is of value that a that a potential uh creditor can
33:04 come and try and take from the business we want to put the same umbrella of protection around them and it may not be through a faap or an EAP there are other things we do so the answer is yeah you'd want to put you you typically would consider putting shares of a a closely held business in one of these or or the business assets itself and and when you have the trust set up presumably um it's doing all of its banking Etc in in the Cook Islands to use that example the the um the beneficiaries though probably still have just a you
33:39 know regular bank accounts here in the United States so there's some sort of um methodology for moving funds back and forth is that pretty much how it work yeah and And to clarify the bank can be anywhere all right that the trust does not have the trust doesn't hold the money itself it's got to use it's going to use a bank so why is there's actually only one very good private bank in the cook Island the Cook Islands itself and I use them all the time but it's not when I say all the time I mean probably still less than half most of my clients are going to use banks in Europe somewhere used to use Asia a lot but the
34:14 Asian banks are getting really hard to get into but but the banks in Hong Kong and Singapore and Switzerland and lonstein are are terrific I mean they're a a double a rated Banks um or triaa rated Banks or they're as good if not better than any banks here in the United States so we would typically use a European Bank more often than not but the answer to question again still you know if you're using p and C Bank we're we're we're we're not they don't have ATMs on the corner right um what you would do is just just a wire transfer so you open your trust we open
34:51 a bank at at say Kaiser Partners or PCT or somewhere in Switzerland you you you got a bank account here at at well Fargo or Bank of America or chase or one of those literally just wire money from Chase to uh pte and now your your trust is funded it's an account owned by the trust and that's that's where your money is if and again it's difficult to spend that money if if you need it for something you would do one of these letters of wishes I talked about dear trustee I know I can't force you but it sure would be swell if you'd consider sending money to to my account here in the USA because I need a new car all right and here are the coordinates to my
35:27 bank and and the trustee will order the Swiss bank to wire money from that account to your account here in the states where you have direct access to it or uh you can actually have it uh have money wired directly to whoever it is you need to go to so in my example uh maybe they wire money directly to the car dealer got it so or or you know whatever it is to the escro company if you're buying a house or something you know so you you if it never passes through your fingers and so if if there's an open judgment out there it can't be intercepted it can't be grabbed right so for daytoday you know living
36:05 expenses and such typically it sounds like that wouldn't be funded by the trust um that really the trust is there to protect assets um as needed to deal with perhaps you know larger expenses that someone might have but you know to buy food you know yeah whatever you're gonna that that's going to happen whatever your regular source of income is it it is it is uh that's exactly right it it it's your savings is is typically what it is now we we have some clients that that are in the um wind down phase of of their careers um where
36:43 they're not really working anymore and and use this money to live off of and what we would typically do there is we would tell the trustee just pay a monthly uh allowance a stti a stien whatever you want to call it okay just every month just routinely unless I tell you otherwise plan on the the first day of every month wire me $20,000 and uh just do it that way I would tell anybody to keep you know their personal accounts here just funded to the extent they need it to I mentioned earlier go to the ATM and go by dinner pay their bills or whatever and and yeah you want to leave the bulk of your savings overseas if that's how we
37:18 have it set up and and how does the tax situation work presumably the assets that are being held by the cook Island trust they they may be appreciating they may be generating income so um how does that work with respect to um both you know taxation in the Cook Islands taxation here in the United States and oh go ahead I'm sorry just to add on to this um what happens when let's say the trust you know let's say I have a Cook Islands trust and I say hey trustey if it's if it's you know okay with you I'd
37:55 like to have you know uh $20,000 okay so so they send me $20,000 what do what happens tax-wise with with you know money that's that's sent to me go okay the cook Island trust is tax neutral it's 100% by by design it doesn't have to be and there sometimes we don't want it to be in a different story on a different day but but they are uh self- settled grantor TR us all right and and that basically makes them disregarded as far as the IRS is concerned okay so any income it
38:30 generates so by the way in this planning and just to be clear you can do tax planning but there's nothing magic about offshore so a lot of people think that it's oh you go offshore it's it's obviously a tax scam it's absolutely not um there there is a a statutory regime out there called fetka the foreign account tax compliance act which makes that impossible but but that aside most of the trustees weren't playing that game anyway and and really haven't been for some time I'm not going to insult anybody's intelligence and say 40 years ago in the 80s they weren't doing that sort of stuff but been been a while you
39:05 know that's that's not the game they're playing it is it is everything is transparent to the IRS everything is reported everything is tax neutral so if you have a an account here in the USA and it's invested and say it earns you $100,000 in interest or dividends or whatever it is uh just like uh the domestic Banks going to going to send you a1099 the for Banks do basically the same thing under this FAA regime so the the IRS is going to know about the income it's going to be to the extent there's a tax do and owing America we could tax dollar one day one the minute we earn it it's
39:40 reported you better report it on your town 40 because the IRS is going to know about it and you you got to pay your taxes on it just like just like anywhere and and the by the way the the trustees do take uh fairly extreme steps to make sure tax compliant they do not want to help anybody evade taxes that's not what they're about um it you know and then distribution by the way it does not trigger any any additional tax it's after tax money presumably okay so the flip side of that coin is if you have to liquidate a security for instance to generate cash to do something and there's a capital
40:15 gain you know to the extent there's a a taxable consequence to doing that it has to be paid just like if you're doing it domestically okay and and what if someone's wealth is primarily in real estate so um let's let's just say they they've got you know five properties to use your numbers to make it easy they're worth you know $2 million a piece right they're they're generating income you know the expenses have to be paid so there's there's a property management company that's handling that um again is
40:50 that going to work essentially like it would um both operationally and taxwise um as as if it were owned domestically as as as opposed to the the Cook Islands trust yes it will work operationally and and with regard to taxes exactly the same but got to expand on that and that that's a great question we live in in California I do business all over the country and all over the world and for real property a trust like this does not do you a ton of good in a state like
41:26 California and let me let me explain okay uh these discretionary these irrevocable discretionary spendthrift trusts that I've been talking about in 21 American states are recognized as asset protection vehicles uh which means in 29 States they are not California being one of them all right so the the the way it works if you're in one of these states that recognizes them and say for instance since the one that's closest to us and the one that's probably as well known as anywhere is
42:02 Nevada okay if you have a Nevada trust and you have Nevada property in your Nevada trust and you get sued by someone in Nevada or someone who's another nevadan um the way the the argument technically is if I go to sue you and I get a judgment and I try to execute my judgment against your property you would go to the court and say Court should not be allowed to execute against that parcel of property because it's not mine it belongs to someone else and the court will naturally ask well all right who does it belong to and the
42:37 answer is it belongs to the XYZ trust or whatever your trust is called Nevada will look at that and go oh so it does motion quashed California will look at it and say yeah good try we we don't Rec you know if it's a self-settled trust if you set up a trust even if it's one of these irrevocable spendthrift trusts and and you set it up where you're the beneficiary California looks like at that and says that that is not an asset protection vehicle so that's fine look with cash you can pick up cash you move it overseas it doesn't matter what California says you talk about real property you can't pick up your real property and move it overseas it's always sitting a couple blocks from a
43:13 California courthouse somewhere and and that judge has absolute authority to to uh do what he or she believes what is appropriate with it and if if that means allowing someone to foreclose or or put a lean on it or whatever it is than than they do so the the the the straight up dapt or I'm sorry fat fore an asset protection trust doesn't do a ton to protect a real estate portfolio so in States like California in States like Nevada or Wyoming or Alaska or Delaware or Missouri or Tennessee or Ohio I can go
43:49 on the 21 of them right uh it would be it would work out real nice um so for for real property we have other techniques use I mentioned that the trust that I've been talking about is the self-settled trust one technique that that we use a lot is a non-self settled trust so a nonself settled trust is is considered a completed gift all right and that's an important distinction so it it reason we don't just do non-self settled trust for everybody is there's some tax consequences and other things that that that a little more complicated that you can work around but but if it's a completed gift trust and say you make your kids the beneficiary you're not a beneficiary now and I put it in one of
44:24 these non- self-settled trust the real estate now that argument is going to work it's not mine anymore well whose is it it belongs to the XYZ trust so there there's actually would be a follow-up question in California judge would say well all right who settled the XYZ trust I did all right that's a strike against you who's the beneficiary of the XYZ trust someone who not me you're going to win that argument in California now right and then there are other things we can do to protect real estate in California the some reallocation of debt and things like that so there there's a couple things we we we do that are that are that'll that'll work what will
44:59 protect the real estate portfolio but it's harder in a state like California than one of these dap States right so in Nevada because they recognize that whole concept self-settled discretionary spendthrift trust as an acid protection vehicle I even if you if you put your property in a Coke Island trust or Nevada trust for that matter it will protect it in a in a state like Nevada just not California's and California's of the world and the other states that that fall on that side of the right what about um if the real estate has been securitized either um you know maybe it's a you know a limited
45:35 partnership interest that that you know that the person has or or you know it's it's some sort of Reit or something like that um would would an asset like that um be afforded protection by a cook Island trust yeah look if it's a Reit for sure you're talking about your interests right that that's what you own you own your interests you really don't have a whole lot of management over the over the property itself right so uh you absolutely or Delaware statutory trust another tool that people use um you know
46:11 the real estate itself is going to be safe and if your interest in that that Delaware stature statutory trust or Reit is being held by the trustee overseas you're you're golden I mean that that's that's your firewall um you know if it's just in an LLC or Limited a partnership or something like that well to to the extent that the entity itself will hold up yeah um you know the problem with with those are the the interests themselves are potentially exposed as assets that a creditor can take but again if you if you take the interest so I've got an LLC that owns real property I take the LLC
46:48 interest and I assign it to my trust theoretically that should work unless or until a court looks at it and says well I'm gonna allow this creditor to end run the LLC it's you know piercing the corporate veils and you know under capitalization Alter Ego there's a couple strateg or a couple theories that you can you can pierce the corporate veil if if you can convince the court that the entity is separate enough from you then then it it may hold up right um the other problem is with the LLC itself is the one that committed the the act that got sued if it committed the Tor or breached the contract or whatever
47:24 it was it got sued so you're doing business as in LLC and your LLC is your operating company and it owns the building that you operate out of and and it gets sued well its assets are going to be exposed which by the way is another asset protection technique is you separate you want to separate property of value from the operating company so in that scenario get another LLC to own the real property and lease it back to the operating company right operating company is the one that's going out and and has potential of getting in trouble and uh it's only a tenant you know it's
48:00 right so if the operating company gets through the property is still going to be safe right right absolutely absolutely well um the hour zoomed by so um I I I we could easily go on for another two or three hours I think there is so much here so uh you know hopefully you will you will come back again and and we'll delve in this some more because it's it's it's it's fascinating there's really there's a Nexus here not just between estate planning um but also with with like you said the asset protection and but also how you put all
48:36 this together for someone who has their own business all of these things really they're they're part and parcel of an overall you know financial plan that I think people really need to consider so I I would agree if I say one more thing to that point if you have any property and anybody in your life you care about you should do at least revocable living trust all right that that is just spare the family the the the agony and delay and expense of of probate um if a lot of things a lot of things like attorneys
49:11 that that do a lot of these revocable living trust don't talk about this very much but another scenario where the revocable living trust is just vital is God forbid you become disabled I don't talk about that a lot what happens after I die what happens after I die well okay that's easy when someone dies it's very simple you've got point a they die point B is distribute all the property and that line from point A to point B can get a little Jagged but it there's an end there's always the the the the end goal right it it's infinitely worse when when someone gets disabled and it's certainly rare we're all going to die and knockwood most of us don't spend a
49:47 ton of time disabled uh but but it if you've got your own property and you get sick to a point where you can't sign your name or you can't make a decision what happens to that property when you're in the hospital and and in a coma or something Heavens forbid um and it's it's a nightmare scenario and again I don't want to spend hours talking about that too so everybody needs to at least do that kind of planning right but as a subset of that kind of planning this asset protection vehicle it's going to be a a narrower group that's going to need it it's going to need it but um I I
50:23 wish more lawyers would would talk about it and and um have this kind conversation in addition to what happens after you die if you become disabled well are you are you in good shape to where if you get sued financially you can you can survive that would you be able to retire on time would you be able to to um uh uh eat you know I mean how how bad can a lawsuit hurt you well the answer to that question is pretty bad right right or get your health care I mean I I I've seen situations where there wasn't proper estate planning done and and the
50:58 the the parent in this case became um disabled and the kids started fighting over the money yeah right in the meanwhile the mother needed health care so yeah not th% and those are unfortunately uniquely American problems but but um yeah that's where we all live so yeah indeed indeed well well Craig thank you so much for coming on the show today um I'll I I will um put your contact information in the show notes after the show posts so that if someone
51:33 listening to this wants to consult with you they'll be able to get in touch with you put your address there and um your your LinkedIn profile and perfect and U you know um um what I can tell you is and and and those of you who watch the show regularly you know I I speak to a lot of attorneys I I have never met a lawyer who knows so much about this area can speak about it not just so well but so understandably right because it's really easy to blow a lot of you know lawyer lingo and and sound you know
52:10 intelligent it's another thing to really understand the the inner workings of it and and as you can see Craig clearly does and has he's got the chops of living in you know all over the world basically um to to to support that so so Craig I'm gonna have you hold tight for just one minute so I can wrap things up and we can talk offline for a moment that' be great really appreciate you having me it's a lot of fun thank you yeah my pleasure my pleasure so tomorrow at 10: am is my at 10 amm Pacific time is my show uh business lessons from the military we're going to be talking about
52:46 the Battle of New Orleans this was really the final battle of the War of 1812 although the war actually was already over by the time this battle was fought there are some unique lessons that I think we can draw from how uh um General Andrew Jackson um and his kind of partner in in crime I use that somewhat uh factitiously the pirate John lefit um used in in order to uh to win that battle so I hope you'll join me again tomorrow at 10: am. and then Wednesday at um 10:00 a.m. Pacific time
53:24 is my show um people making money and we're going to be talking about one of the most well-known figures in the self-help World Dale Carnegie and and I think it's reasonable to say that when it comes to what we now call emotional intelligence Dale Carnegie really was dealing with the roots of that and so we're going to take a look a little bit about just his background and who he was and then talk about his philosophy if
53:59 you have never dealt with um Dale Carnegie's philosophy I encourage you to tune in you will not find uh a a better source for um improving the skills that matter most in in in business The Business and Professional world today and then of course a week from today we'll be back for the next edition of trust and Estates weekly um and my guest is going to be uh Michael seagull and so I I you know invite you to come and and
54:34 and hear what Michael has to talk about so uh last time Craig thank you so much again for joining me and signing off as I always do Marie darling you you are my bell you know you are courage