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Wealth Preservation with Lee Phillips

This show is incredibly important. The reason why is you can go in and mass, a whole bunch of wealth for yourself. However, if you don't understand how to build the foundation, if you don't understand how to preserve that wealth, you are in for a very rough ride. How many times have you heard the story of someone amassing wealth only to get a lawsuit or only to lose it all in some weird way? This is incredibly important.

It's with Lee Phillips who is a United States Supreme Court Counselor who has helped over half a million people understand how to use the law to not just preserve your money, but to make money and at the same time protect your assets. It's going to be a little interesting of a show because some of us might not have assets to protect. However, don't discount this because you've got to set your foundation the right way. You never know what's going to happen. For some of you, this is going to be absolutely critical because as you grow your wealth, you become a bigger target. I don't mean to scare you, but I do mean to scare you because it's real and it's legitimate.

Lee is an amazing speaker and communicator. He understands how to take a subject that is complex and simplify it and make it entertaining. That's why I brought him here to the show. The other thing that's mission-critical for you to understand about the show is there are important tax cuts, tax advantages from President Trump that are enacted that a lot of people don't know about, even your adviser, even people on your team.

Right at the very beginning, we addressed that because the window is only going to be open so long for business owners and entrepreneurs. You need to know exactly what to tell your adviser, so they can look it up so that you can get this big benefit. For my entrepreneurial part of the WealthFit nation, my small business owner, this might be one of the more instantaneously profitable shows, making no claim here. If you will take this information and apply it, this could be something that helps you in the very short-term. Also, this conversation is very much long-term.

Dustin
Lee, thanks so much for being on the show. I appreciate having you.
Lee
It's great to be with you. Thank you.
Dustin
Lee, I don't believe most folks know this about you until they've seen you speak or maybe have seen a video of yours. You have this amazing ability to take something that's rather complex. Some might even say boring to a certain percentage of folks, but you simplify it down and you are able to communicate in a way that's powerful. You’re often wrapping around stories so that it lands with your audience. Before we get into the strategy, the details and we unlock your brain here, I'm curious as to how you've been able to develop that skill.
Lee
I've talked for a long time and I've spoken to well-over a million people and 5,000 live presentations, so I've done it for a while. If you're unlocking my brain, you're going to find there's not much a value in there though so don't do that.
Dustin
One thing that you're going to love about Lee is his humbleness. You have an amazing track record, history of law, history of working with entrepreneurs, Supreme Court is in the mix there and many other accolades. We reconnected and you led with something incredibly powerful that everyone should know about that's an entrepreneur or an investor. It's this new tax advantage that most people don't know about and might not find out about until it's gone. Will you share what you shared with me?
Lee
It's amazing that nobody or very few people seem to understand much about the new tax laws and yet Trump has given the average Joe more than just crumbs in my opinion. Most people don't know about section 199A. The short story is that if you're a small business guy and you have a pass-through business, that could be an LLC tax as a partnership, an S corporation or even a sole proprietorship in an LLC, they call out a disregarded entity when the IRS just uses your Social Security number and you file a Schedule C. Real estate investors also qualify as pass-through if you file a Schedule E at any rate. 199 says if you don't make over $315,000 a year, it is and we'll assume that that's the case. You get to take 20% of your profit, take all your expenses and everything else. You figure out what your profit is for the year. The short story is that you get to take 20% of it off as a deduction. Deduct it as if you made an expense out of your pass-through entity. That means bottom line you get to take 20% of your profit tax free this year. That will run until 2025. That's more than a crumb in my book, Miss Nancy. That's not a bad deal.
Dustin
What's the impetus behind this? Why did this pass? Do you know the psychology or the backstory?
Lee
The psychology is that the C-corporation guys gave a flat tax 21% of everything. What about the little guy? I've got my little company and I'm making a couple of $300,000, $400,000 $200,000 or $150,000 a year. What do I get out of this? They said, "We'll let you take 20% of your profit and take it tax free." It's a deduction. It comes off. I'm going to say what's below the line. When we're talking accounting, there's always above the line stuff and there's below the line stuff. The line is the last line on page one of your 1040. It's called adjusted gross income. I'm going to be called a heretic here by the accountants. The adjusted gross income controls your tax rate whether your deduction is phase out or your exemption is phase out. It controls everything whether or not you can do a Roth IRA or not. The AGI is very important. Anything on page 1 above the line is something that either adds to or subtracts from your adjusted gross income. If you're worried about fitness of wealth, you need to worry about above the line. Unfortunately, many advisers plan below the line. In this case, the 199A deduction is below the line. There's nothing we can do about that, but that means it doesn't affect your adjusted gross income. After everything is said and done, you get that 20% tax free. If you make more than the limit, the $315,000, if you're a doctor or a dentist, a lawyer, liar that's Texan attorney. Dustin, you go down to see your liar. You do know how to tell if a lawyer is lying, don't you?
Dustin
How's that?
Lee
His lips are moving. That's the easy part. Here comes the hard part. Do you know what a good dead lawyer does? A good dead lawyer lies still, any rate. If you're in one of these service professions, the way it's worded is if the owner uses his skills to make money. Anybody who's making money in any type of business is using their skills, but they've applied this to lawyers and stuff. If you're under the limit, you still get to take your 20%. If you're over the limits, then you have to worry about different things. There are a number of tests. You can take up to 50% of your salaries that you've paid if it applies and certain equipment. It's very complicated and you're going to need to talk to your adviser. The LA Times, it was passed in the tax acts, tax reduction and the JOBS Act. The LA Times came out and said, “This is cool, but a lot of people aren't going to get to take advantage of it because they can't afford to pay for the advisers who are going to understand it.” So much for simplifying the tax code.
Dustin
What's your opinion of that? Why aren't advisers, especially ones with entrepreneurial clients, being sent a memo or a mandate or bringing this to their clients?
Lee
They are. It's never been mentioned on the public news type of stuff, but advisers certainly know about it. They're learning more and more about it. It is complicated but it's a great deal for someone who is a small business guy, who has a pass-through entity. That's any type of business, even the real estate stuff as long as you're not a C corporation or an LLC taxed under Chapter C of the IRS code. If you're C, then everything is 21%, end of discussion. For the rest of us, we get this other deal and it's not a bad deal but nobody's talking about it.
Dustin
I love that you're talking about it. Lee, folks could maybe seek you out. Let's say they have an adviser or they have somebody on their team, what's the thing that they need to say?
Lee
They need to make sure that the adviser knows all about 199A. Don't come to me. I don't do your taxes. I sit and shake if I see a tax form, so don't do that. I'm good at the strategy but filling out the forms, forget it.
Dustin
I want people to know you how I know you. You are the wealth preservation and accumulation guy and that's such an open-ended thing. The adage around WealthFit is we're very focused on helping people make money and create wealth. The other side of that coin probably the more important side is the preservation of that wealth from tax man from government and from unfriendly lawsuits. What do you see entrepreneurs or even investors doing? What are the big mistakes that they're making? What can we do about it?
Lee
You're talking about wealth preservation. There's the old adage that it isn't how much you make, it's how much you keep. There's a lot to that. If I say asset protection is lost, it's a lot more than lawsuits. 56% of all bankruptcies in the United States are a result of somebody in a family getting sick. The question is, are you going to lose your little business when one of your kids, your spouse or you get sick? The question is, what is your rental unit, your piece of real estate when somebody in the family gets sick? If one of your rental unit goes down, has a problem and get sued, are you going to have that affect the other rental units? You need to create legal pockets in order to protect the assets that you do have. As long as we're talking about it, it's the illness but it's also the IRS. The IRS has taken a big chunk and we just talked about 199A. Let me give you an example. Take a dollar and double it twenty times. People don't understand tax. This is an illustration. You double the dollar twenty times, $1, $2, $4, $8, $16, $32. You end up with $1,048,000 and change. Not bad, but there's no tax on that sequence. It's just a mathematical sequence.
Let's say tax is at 40%. If you're in a higher tax bracket between the federal and the state, you can get 40%. Besides that, I don't know the numbers for 40%, but you tax it at 40%. I've got $1, I double it. I now have $2, but I’ve got $1 in profit. I've got to tax $1. I taxed it at 40%. I have $0.60 left. Take $0.40 off. I don't have $2, I've got $60. I'd double $60, that's $320. I've got to tax the new $60 and so I don't get $320, I get $250. On the one hand, I doubled it twenty times and I got $1,048,000 plus. When I double it twenty times and I take 40% tax each time, that means I'm losing 40% of $1,048,000, so I've got about $600,000 left. You've lost $400,000 and $400,000 is a big deal to me. I don't know about you, but that's the tax. I don't think so. Do you end up with $600,000? You don't end up with $600,000. What do you end up with? Any guesses, Dustin, or have you seen this?
Dustin
No, I don't have any guide. I don't remember seeing this but no guesses, $300,000?
Lee
No, you end up with not $1,048,000 but you end up with $12,089. That's called taxes. People don't understand taxes. If I can save you some taxes, it isn't I save you 10% of $100. No. That works out to be huge over your lifetime. If I can take 10% off of your tax bill, that's huge. That's not another $10. The eighth wonder of the world is compound interest. Taxes are compound interest in reverse. Nobody's ever told you that have they? I have to control the taxes. That's part of asset protection. The lawsuit, the illness, are you going to lose your rental unit because somebody is sick? If one of the rental units gets sued, has a problem, are you going to lose the other rental units? Are you going to lose your business? We need to create the legal pockets. If I'm walking down the street and I have all of my money in my wallet. I get my wallet and my purse, I'm through. If I have taken some of the money out and put it in the front pocket, then when somebody walks along and picks my wallet, I don't lose it all. I’ll only lose what's in the wallet.
What we're going to do is take some of the money out and put it in the one front pocket. We're going to take some of the money out, we're going to put it in the other front pocket. We're going to put the $100 under the sole in my shoe. I've got a money belt, so I'm going to put some on the money belt. You stuff some down your underpants. You put some on your bra. The problem with that is if you walk into a 7-Eleven to buy a Slurpee, you’ve got to undress to make a change. The lawyers have you go way overboard in creating these pockets. A number of years ago, two doctors in Long Beach, California called me up and they said, “Philips, our attorney, our asset protection dude set us up. We've got 53 properties and he was using family-limited partnerships.” Nowadays, I'd use an LLC. He said, “You have to have a separate family limited partnership for each one of the 53 properties and this particular attorney lived out of state from California.” He gave these guys a deal. He only charged them $5,000 per 53 limited partnerships.
Since he was out of state, he said, "You want these limited partnerships to be created in my state, not in California because in California, it's $850 a year for your limited partnership. You want them in my state. I'll act as the registered agent. You've got to have somebody in the state to represent you and I'm not only a lawyer, I'm an accountant too. I'll do the taxes. You, doctors, are busy. I'll give you the warrants. All you have to do is file your taxes, nothing due on and I'll only charge you $1,500 to do the accounting work and act as your registered agent, $1,500 per year per 53 limited partnerships.” These doctors called me one day and said, “Phillips, how do we get out of this? We don't care about asset protection anymore. We're not worried about that. Our lawyer has all of our money. How do we get out of this?” Don't let the lawyers push you over the edge. What you do need is a couple of these legal pockets. When I say legal pocket, I consider a trust, an LLC, a limited partnership or a corporation, a legal entity. You're going to own different assets in these different legal entities. They're going to interface with each other. Which entity you're going to use is a whole another gig.
That's another one. You're going to put different assets in different legal pockets and then they're going to interface. They all interface go through your living revocable trust, so we don't have to probate them when you die. It doesn't give us any more asset protection to have a living revocable trust there, but it does mean that we can avoid probate. Your business lawyer and your estate planning lawyer are often two different guys. Even if they’re the same guy, they don't interface your business structures with your state structure. Your little business is an asset that has to be probated when you die unless you do some homework in advance and you still live in your revocable trust.
95% of the businesses in the United States die within a few years after the owner dies, the founder. Very few businesses survive the death of the founder. One of the major reasons is in this probing process, they get caught up in this probate process. I can't sell my medical practice because it's in probate. If I can't sell it for a year and nobody buys it, at the end of the year after the probate, all the clients or all the patients have gone bye-bye. How you structure your business and interface it with your estate plan is a big deal and they don't do that. It's just a little sideline. You're going to create these pockets. You've got a lot of investors. They do straight up oil and gas investing. That's usually done in a limited partnership.
You become a limited partner. You may be doing the stocks. The question is do I need an entity to do the stock trading or the investing? The answer is yes, maybe not unless you've got a lot of portfolios then we can set up a limited liability company, for example, and make it. That if you got in trouble personally, you didn't lose that portfolio. How do you get in trouble personally? You hit a kid in the crosswalk on the way to church on Sunday. That's not a business problem. That's a personal problem. They sue you. They take away everything you owe. If it's in an LLC, we may be able to protect it. If it's in a corporation, we can't protect it. They got it. Which entity you use is a big deal. We need to think not only protect me from what happens in the business. We need to think to protect the business from what happens to me. If I get sick, do I lose my business? If I get divorced, that's bad business. Are you going to lose your business when you get a divorce? The answer is it depends on how you set it up. It makes a big difference as to what they do and how they protect their assets and solve their issues.
Dustin
What comes next naturally?
Lee
We've got the business structure interfaced it with the estate plan. We've talked about the personal.
Dustin
Can you unpack for me a little bit or explain the difference between the entities because I'm sure people have questions about that, the difference between a corporation, S-corporation, C-corporation, the different options?
Lee
There are two or three points to it. The one thing that people need to understand is the legal or the asset protection structure of an entity has no relationships to the tax structure. For example, an LLC, you can have it taxed any way you want. The LLC was created in 1977 in Wyoming. It was a cold winter. They didn't have much to do in their legislature. The jackrabbits weren't running around and they decided to create a new entity called a limited liability company. It's not a limited liability corporation. It's a limited liability company. It has elements of the corporation and it has elements of the partnership. It's a marriage between a partnership and a corporation.
One of the big issues is, "Mr. IRS, how are you going to tax this new animal?" They expected the IRS to create subchapter T of the IRS code or whatever it was. The IRS didn't do that. It took the IRS twenty years. That's generally how the IRS operates. It took the IRS twenty years to come back and say, “We don't care how you tax this animal. Check the box.” You decide how you want it taxed, so you can have your LLC taxed as an S and an entity taxed under subchapter S of the IRS code. You could have a tax under Chapter C of the IRS code. You could have it taxed under the partnership rules. You could have it taxed under the sole proprietorship roles. That's the disregarded entity.
The IRS disregards it. The IRS doesn't even know that you have an LLC. The words LLC don't exist in the IRS' vocabulary. They don't get it. How's it going to be taxed to corporation to corporations to corporations? Is it taxed under Chapter C? Is it taxed under Subchapter S or is it a non-profit? The legal structure is identical. The question is how's the taxation? The first thing you have to do is understand that taxation has nothing to do with asset protection. You have a tax that makes the difference as to how much money you take home. The sad thing is all the time I talk in big groups and in big seminars and people come up to me and they said, “I got my LLC.” I say, "How's that tax?" They look at me and say, "I don't know."
If the IRS is your major impediment to financial success, don't you think you ought to know how your entity, your company, is taxed? It might be a good idea. At any rate, the taxation structure is independent of the asset protection structure. In the way of the asset protection structure, you know that a corporation has the corporate shield. That protects the owners, officers and directors from things that happened within the company. If the company produces a widget that hurts somebody, then the company is going to get sued. In theory, the individual owners, officers and directors aren't affected personally by that lawsuit. The corporate shield protects the owners, officers and directors. The LLC has the identical corporate shield of a corporation. When Wyoming married, the corporation and the partnership, this LLC thing got half the genetic code from the corporation. In that genetic code was the corporate shield. It's identical. What did they take from the partnership?
I've got to give you a history lesson. Four hundred years ago in England, the only type of entity there was was a partnership. You, I and Joe got together. We spent 30 years and we built a nice business and we were partners. Joe was a screw up and he got in trouble. I'm not exactly sure how you got in trouble 400 years ago in England. You didn't pay your taxes. You pissed off the king and hit somebody with your horse. They got divorced, I guess, they did that back then, but you got in trouble personally, Joe did. Joe got a judgment against him and his creditors got his partnership interest. His creditors now become partners for me and you. The catch is where the partnership, any one of the partners can sell a company. They can contract on behalf of the company. They can do whatever they want to on behalf of the company. Joe's creditors now sell the company. You and I have nothing to say about it. We lost 30 years of our work because Joe got in trouble. That's not fair, is it?
Dustin
No.
Lee
The Brits said that's not fair. They passed a law, which said that when Joe got in trouble, his creditors couldn't come and take his partnership interest. They had to get a judgment against him and then they went back to court. They asked the court for an order charging Joe's interest in the partnership with Joe's debts, whatever Joe owed the creditors. Joe's creditors now were not partners anymore. They were basically a lien holder. They say that these creditors have an economic lien against the partnership. If the partnership declares a profit, they get it. Joe doesn't get it. Joe could still work for the company and get a wage, but if there's any profit or loss, Joe's creditors get that because they have a charging order. The concept of a charging order was attached to the partnership. When Wyoming married the corporation and the partnership, it got the genetic piece of material from the partnership that contained the charging order concept. What does the charging order do? If I have a corporation and I get in trouble personally. I get divorced, I get sued, I get sick. One of the kids gets sick and I have to declare bankruptcy. My bankruptcy trustees will come, and they will take the stock in my corporation that's one of my assets.
The funny thing is this is my corporation. I'm the only stockholder. Once my creditors, the healthcare get the stock in my company, they own it. They replace me as president. They replace me as officer director and they have all the assets of a corporation. They sell all the assets. I just lost my business and all of its assets. If, however, my businesses operated as an operated is a limited liability company, an LLC, they can't just come and get my stock. On an LLC, we don't call it stock. We call it membership interests. They can't just come and get my membership interests.
They have to get the judgment against me. Then they have to go back to court and ask for an order, which charges their debt, the debt that I owed them, against the partnership. It's not a partnership, it's a limited liability company. They get a charging order. They get an economic lien against the LLC. If the LLC declares a profit, they get it. I don't get it anymore, but the law says that that's their only possibility of getting a recovery from the LLC. They can't come in and manage the LLC. They can't come in and sell the assets. They can't tell the LLC managers what to do. They just wait for a profit or loss to be issued to them on a K1. That's very different than the corporate scenario.
What we saw back in 2008 is the real estate investor, one of the units had gone bad. It would have to be sold and there would be a deficiency. The creditors who own the deficiency would then go against the next piece of property and sell it to try and satisfy the deficiency. If they didn't get satisfaction of the deficiency in that piece of property then they went on to the next piece of property. The short story is there were lots of investors and they lost everything because it dominoes down once one of the pieces of property went bad. If those had been in separate LLCs or even a couple of LLCs, that would have isolated the pieces of property from the one piece of property that went bad. They would have had to have gotten a charging order against the LLC and waited for profit or loss. I'm still a manager of this LLC, exactly how often do you think I'm going to declare a profit if I don't get it anymore but you do? I'm just going to raise my wage and there isn't going to be any profit. That gives you an excellent asset protection advantage.
You can go to the creditor and say, “I'm not going to issue any profits on this deal. Why don't we settle this for a dime on the dough?” He got a pretty good argument. That's pretty good asset protection. We've created the legal pockets and I started to see you have a separate LLC for each one of your pieces of property. That doesn't work because you can't keep more than two or three of these LLCs going at a time. You can't keep that many balls in the air. Let's put the Section 8 properties in one LLC. Let's put the high-end residential in another LLC and let's put the strip mall, the commercial property in a third LLC. We don't have a separate LLC protecting each piece of property, but we have three LLCs. We have three pockets and I'm not paying $5,000 for set up of 53 LLCs. I'm not paying $1,500 a year times 53 in order to manage my entities. I'm just paying for three. Some of them may all be lumped together, and I might lose a couple of them at a time but at least I have three pockets at this point.
Dustin
That makes a lot of sense compared to what you were sharing before going entity after entity.
Lee
You just can't do it. The expenses, the taxes, everything else become insane. The question always is, “Where do I create my entity? Do I go to Wyoming to do my LLC? How about Nevada? Nevada has privacy laws. Everything is cool in Nevada. Delaware is good. New Mexico has got great laws for LLCS. There's a big company running around in Utah.” I say, "You’ve got to do your LLC in Utah." One, I live in Utah. Two, Utah has some of the worst laws in the nation for LLCs. I almost don't like to create an LLC here even though I live here. Where do you create your LLC or your corporation? The only answer is you create it in the state where you are a resident or where the property is, where the business is. It does you absolutely no good. I will underline no good. You are nuts.
It does you no good to put your LLC or your corporation in Nevada when you're renting your buildings in Ohio. If your LLC is a Nevada LLC and your properties are in Ohio, I'm your tenant and I figure out that your LLC is not legitimate, not registered in Ohio, I'm not putting any more rent. There's nothing you can do about it. You can't foreclose on me because the LLC the owner of the piece of property has no rights in Ohio. Any time you put a corporation or an LLC in Wyoming, Nevada or Delaware and you have a business in Florida or a rental unit in Florida, you have to register that Nevada LLC in Florida. You become subject to all Florida's laws. There is no more privacy. You have just disclosed everything to Florida that you would have had to have disclosed and you originally put your LLC or corporation in Florida. You are subject to all of Florida's laws. Your tenant does not have to go to Wyoming or Nevada to sue you. They sue you in Florida.
“Tell me exactly why I put this LLC or corporation in Nevada in the first place?” “It's because some guy told me that it was a great place to have an LLC or a corporation.” Fifty years ago, Nevada passed some pretty decent corporate laws and it started to attract businesses to Nevada. There were a number of people in Nevada that figured out that this is pretty good. If anybody does create a corporation in Nevada and they don't live in Nevada, they have to have a personal representative or a registered agent as we call them in Nevada. I'll act as your registered agent and you pay me $1,000 a year. A registered agent doesn't do anything. They receive one piece of mail a year from the state. They hurry and forward it to you so that you can pay the fee. You're paying a guy in Nevada to do nothing. If I can get a thousand guys pay me $1,000 a year to do nothing, that's a good deal. Sign me up twice. It's a big business, but it does not give you any more asset protection. I will underscore that. I will circle it. I don't give a damn what they say. If your rental unit is in Ohio, you are subject to all Ohio laws. If you don't bow to Ohio laws, do everything that they say you need to do, you have no rights in Ohio. “Explain to me exactly why I have my Nevada Corporation where my rental units in Ohio?” “Because the guy said it was a good deal.” It's a good deal for him not for you. Dustin, you're down there in California. Can I talk you into moving out?
Dustin
Yes.
Lee
Californians are nuts. In California, you pay $850 a year. Remember the guy with the 53 limited partnerships and Long Beach, California owner of the properties? He said you don't want to register him in California, you want him in Utah. Did those limited partnerships, do these doctors do any good in California? Not likely because they had no rights in California. California has an interesting little bippy this is unique to California. If you own 25% of a company outside of California even though you've never been to the state where the company is, you've had nothing to do with the company. You simply bought stock in the company but you own 25% of the company. You, by law, have to register that company in California due to the sheer fact of the matter that you are a California citizen and you own 25% or more of a company outside of California. I don't quite see how they get away with that, but they do. You're going to get a K1 from this company outside of California and California is going to match up your K1. When they figure out that you do own a portion of a company outside of California, you are not paying the $850 a year to register that company in California even though it never does any business in California of doing. When they figure out you haven't paid your $850, they only have a penalty of $3,000 a year for every year that you didn't pay your $850.
Dustin
I love talking to you and sometimes I don't love talking to you, but I always appreciate the honesty. I appreciate knowing the truth and that's our mission here at WealthFit. I want to ask you about something as well that you're known for and that's this idea of trust. We talked a lot about entities. We talked about taxes. I want to get into trust because there's a lot of misinformation out there. I want them to hear your stance on trust and how do we leverage these the right way versus getting that bad information. We've got all these trusts running around. Thinking we're protected and we're not untaxable and not taxable.
Lee
The trust that you're going to find first is a living revocable trust. It started in California, the movement back in the late ‘70s, early ‘80s and it spread from the West Coast through the East Coast. Trusts are still not nearly as common on the East Coast as they are on the West Coast. The living revocable trust is nothing more than a probate avoidance tool. Anybody that tells you otherwise is lying to you. You're in a community property state in California and there are eight, ten community property states if you're in one. A community property says that a husband or wife are one economic, one legal unit is what it's saying. It's a leftover of Spanish Law. It was in the Spanish Law not the British Law. Most of the country's laws are related to the British Laws, but this is a left-over Spanish Law. It's primarily the South West states that have the community property; husband-wife one entity. If you're in a common law state, the husband could have one trust and wife could have one trust. They could put assets in each trust. The assets in the wife's trust in theory would be protected from the lawsuits or the problems that occurred in the husband's life.
You can get asset protection out of a living trust, but it's the fact that you've got two living trusts, husband or wife, and not one living trust. The living trust does not give you any asset protection. The reason is it has the word revocable in it. You do want one. You do want it for probate avoidance and to distribute your estate after you die. It's a great tool. I highly recommend you need one. The other trusts that you may find particularly if you're in real estate investing is something called a land trust. There are four or five states that have land trust laws. It started in Illinois with the Illinois Land Trusts and you could put a piece of property into a trust in Illinois. It did have some protections and you can manage it and stuff. Unless your state has a land trust law, Florida does, you create a land trust.
The state laws are going to look at it like a living revocable trust and pretty much all of the land trusts are revocable. As soon as you put the word revocable in it, you have no asset protection because you get a lawsuit against you and the creditor says, "Judge, there's all the stuff over in this trust, it's revocable, make him revoke it and give it to me." That's exactly what happens. If your land trust is revocable, no asset protection. There are such things as irrevocable trusts. There are basically two types of trusts, revocable and irrevocable. If it's irrevocable, you have irrevocably given the property and the trust away, it is gone. It's not yours anymore. You cannot get a benefit out of it. That would be a self-settled trust. Basically, you can't do that. The irrevocable trusts were used a lot in estate planning 50 years ago because the estate taxes were pretty onerous. I remember when the estate tax limit was $300,000 anything over $300,000 that you had was subject to a state tax. We've come a long way. The estate tax limit for the federal estate tax now is 11.2 million, about 11.2 million, 11.185 million, but 11.2 million.
For all about 5,000 families in the United States, that eliminates the federal estate tax. There are about sixteen states that have estate taxes. You're going to have to know if you live in one or you don't live in one until years ago. Minnesota had a 41% estate tax, like I wouldn't be caught dead in Minnesota. Prince died up there in Minnesota. They're going to take 41% of his estate. That's a big chunk for the state take but at any rate, the trusts will help you avoid estate taxes if you have an estate tax issue. Other than that, they are generally neutral unless they are irrevocable. They're pretty much always going to be income tax neutral and that they are what are called disregarded entities. You use your Social Security number for the living revocable trust. The IRS doesn't even want to know it exists. It's invisible to the IRS. You're not getting any stuff out of them that way. The land trusts everybody says asset protection. As long as it's revocable, there is no asset protection. They say make the Limited Liability Company the beneficiary, and somebody's got to explain to me what that does. I have talked to numerous lawyers about it. I have tried to research it and there is no logical way that making an LLC a beneficiary is going to give you any asset protection. I don't really get it. You're going to use a Limited Liability Company as an entity to hold assets to do business. You're going to use the living revocable trust to own the LLC, but you're only doing that not for asset protection purposes but for probate avoidance.
Dustin
Thank you, Lee. I could go on and on with you about this because I find it fascinating. At times I feel like it's over my head, but I think for me not knowing is like the worst thing. By bringing this awareness to our audience, to our tribe, it's powerful. If you feel like me, that's okay. Lee is the best guy that I can find to simplify it down. If you fully understand Lee, great for you. Go out, take some action and do it. Lee, what I want people to know or what I want people to do is act. If folks are interested to find out what you're up to or go deeper on one of these subjects with you, where can they find you or more education on these?
Lee
I'm not sure they can have an intelligent conversation with an adviser. The adviser is too dump. I do a lot of these topics on YouTubes. I have a YouTube channel that I address hundreds of topics on for anywhere between two and ten minutes. I take little pieces and clips of it and that's a good source. Dustin and you guys, you're a great source for the entrepreneurs and the investors, and you guide them pretty good. You're going to have to shop around for your advisers, learn what you can. If you have a question, the YouTube may answer it. If not, you can get a hold of me through Dustin. I'm going to have to invite you up, Dustin. I do a little two-day bootcamp three or four times a year and we take a dozen people. I’ll spend two days on this stuff with you. We do have a couple of tax guys that accompany me. They're head of the western region of the IRS and the special auditor for the IRS. They take two or three hours out of the two days to do some tax stuff, but with a dozen people, it's one-on-one in the evenings. I do one-on-one interviews with everybody. That sort of thing is a possibility, but that's a pretty limited possibility.
Dustin
Thank you big time for sharing. You always make it fun, fascinating and interesting. I always learn something new. I suggest people to go back and read this especially if you're looking for what's the conversation or what's the talk point that I can have with my adviser or someone on my team. If they don't know about it and they have no interest in going and researching it, I might say run in that scenario and find a different adviser. It's up to you to direct and steer the conversation because at the end of the day, no one cares about your money or your assets or your family as much as you do. You've got to be a good steward a good shepherd of that. I encourage you to go back and read. Educate yourself and get up to speed on this to take advantage. To stay in line with that old adage, you might be out there crushing it and making lots of money, but it's not what you make. It's what you keep. Lee, thank you very much.

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