With Kroger Brand products from Ralphs, you can make all your favorite things this holiday season. Because Kroger Brand's proven quality products come at exceptionally low prices. And with a money-back quality guarantee, every dish is sure to be a favorite. ♪ These are a few of my favorite things ♪ Whether you shop delivery, pickup, or in-store, Kroger Brand has all your favorite things.

Ralphs. Fresh for everyone. ♪ Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge, skills, insight, and encouragement you need to live a rich and meaningful life now, while building a plan for financial freedom in 10 years or less. My name is Joshua, and today I'm going to kick off a relatively long series on asset protection planning.

Again, asset protection planning. Now, in the Radical Personal Finance rubric, remember that we organize and categorize all financial information and all financial advice under these five components. Component number one is increase income. Component number two is decrease expenses. Component number three is invest wisely. Component number four is avoid catastrophe.

And component number five is optimize lifestyle. With those 10 words, five points, 10 words, you can organize and categorize your information. So remember that steps one, two, and three, increase income, decrease expenses, and invest wisely. These are things that you can actively and continually do. They are subjects and themes to which we return again and again and again, and we continually seek to optimize and improve each of those things.

Point number four, avoid catastrophe, is perhaps the most broad of any of these five points. Because here, I'm simply talking about helping you to avoid any kind of potential catastrophe that you can. Because this is where we take specific steps to protect ourselves, protect our assets from various risks.

Because the nature of risk is so expansive, there's almost no limit to the topics that we can cover under this theme of avoiding catastrophe. And today, we're going to talk about it with asset protection planning. I want to begin this introductory episode with a discussion of what is asset protection planning.

There are a couple of different components or a couple of different ways in which this term is used. Usually, when you see this term used in the financial planning literature, usually this is a legal strategy. The idea is what legal strategies can we put in place so that when we are in court, we can make sure to protect our assets from certain legal claims.

And I think that's an appropriate use of the term. If you read 10 books on asset protection planning, the majority of those books, nine out of 10 of them, are going to be legal textbooks. And they're going to be talking about the use of a corporation for your business entities or the use of an LLC for your ownership activities or the use of a trust of some kind, be it an onshore trust or an offshore trust to hold your assets.

That is an appropriate way for us to talk about asset protection planning. However, I think it's only part of the subject. And one of the themes that I have sought to emphasize in my public work here at Radical Personal Finance is that good financial advice crosses different people's circumstances.

And it has to be scalable. One of the concepts that I've sought to flesh out, which I'm not aware of other financial planners who emphasize this, maybe there are, but I've personally found it very helpful to always apply the lens of scale to all of my work. And to recognize that there are things that you do at one point in life, at one scale of financial wealth or one type of lifestyle that are appropriate.

And those very same things may not be appropriate at a different scale. There are some forms of financial advice that are appropriate at one scale of wealth that are very inappropriate at another scale of financial wealth. There are some attributes of a certain investment product, for example, or a certain insurance product, for example, that are appropriate at one scale of wealth and income that are not appropriate at a different scale of wealth or income.

And the same exact thing applies to asset protection planning. My hope is in the course of this series to demystify the term asset protection planning and provide you with ideas and strategies that are appropriate to you given your current scale, because everybody is engaged in some form of asset protection planning.

If you lock your door at night or when you leave the house, or if you lock the door of your car, when you park it, you are engaging in asset protection planning. If you care for your health, you're engaging in asset protection planning. Now, I understand that that's a very expansive term, and in many ways, if I use such an expansive definition of asset protection planning, there is almost no topic that doesn't fit into this.

For example, if I consider that your car is an asset, but I also consider that your physical health is an asset, then what else comes in? Almost anything. But is that not the truth? Would you trade out your physical health, but make sure that you could keep all of your money?

I have for years defended the idea that your health is one of your most valuable assets because it's your health that leads you to the ability to enjoy life. It's your health that leads you to the ability to create income. If you have health, you can create income. If you can create income, you can always get financial assets over again.

Most wealthy people, if given the choice between their health and their money, they'd quickly give up their money to get their health back if they could do so. Of course, it's not always possible. But I really believe that your health is an asset. I believe that your family is an asset.

I believe that your marriage can be an asset. So why not bring those things in under the rubric of good financial planning? I can't sell a financial product to those things, which is why they're generally not discussed. An attorney who specializes in asset protection planning, that attorney has no professional knowledge or ability that makes them competent to advise you on your health.

They can advise you on the creation of an offshore trust, or they can advise you on what form of corporation to use to set up your new business. And so, therefore, they emphasize that. They emphasize those. A financial advisor who sells insurance, that financial advisor is not competent to talk to you about the physical security plan for your automobile or for your house.

That's not their area of expertise. They are competent to advise you on what type of insurance to buy to protect your liability or what type of life insurance to buy or what kind of disability income insurance to buy. And so because these are the specialties that are the loudest, then these are the things that people think of when they think of asset protection planning.

And it's not a problem. There's nothing unethical or immoral about the financial advisor talking about life insurance or talking about using a qualified plan to invest through. There's no problem with the attorney focusing on the entity selection process. But there is a problem for you if you don't recognize that that's not the sum of your life.

All of these other things are part of your life. And so as your friendly local podcast financial advisor, I consider it my job to try to talk to you about all of these things within my ability, or at least to inspire you to go and find another advisor who can advise you on these certain things.

And since I don't get paid for the sale of specific financial products, I don't get paid for the sale of insurance. I don't get paid for the sale of a new trust for you to buy from me. Then I can talk somewhat freely about all of these things. That's how I want you to think about asset protection planning.

That's how I want you to think about the topic of avoiding catastrophe. Now, in this introductory episode and throughout this series, I'm going to keep the episodes fairly short because this subject is one of those incredibly dense subjects where I could create, you know, 10 three hour episodes. And that takes my overall listenership down to about 20 percent of the audience if I make them so long.

So I'm going to keep these light and relatively short so that they'll be accessible to more people. And today I want to just talk about asset protection. And specifically, I'm focusing on that term. I want you to think about the fullness of the ideas involved in those two words.

Let's begin with asset. What is an asset? What is an asset? There are different definitions to this term. You could use the accounting definition. You could use the rich dad, poor dad definition. I want to use your personal definition. What do you consider to be an asset? Now, an obvious example of an asset could be money.

Money that you have in your wallet, money that you have in a bank account, money that you have in an investment fund of some kind. That can be an asset. But that asset of money could be diversified. For example, you might consider your business to be an asset because your business prints money for you.

It creates money. Your career is an asset because that career allows you to create money. You create it through your physical work. So now the idea of the term asset could be more inclusive. For example, your reputation could be an asset. If your reputation is slandered, that could seriously affect your earning ability.

If your reputation is built on honesty and integrity and you lose that reputation, you may not have as many clients. If your reputation is based upon your competence, you might lose income. So your reputation, your good name, your good standing, your character can be an asset. You may be the kind of person who is known for having a strong and upright moral character.

If so, you'll find that people will stick up for you. They'll defend you. That's an asset that's worth defending. An asset could be something more expansive than money, but still in the range of financial assets such as real property. The house that you live in can be an asset.

The car that you drive can be an asset. The gun that you carry can be an asset. The cabin that you escape to for vacation can be an asset. The surfboard that you own that provides you with a form of entertainment can be an asset. All of these things being a mixture of real property and personal property, these are assets.

The food in your pantry can be an asset. There are other forms of assets as well. The intellectual property that you own. You might own rights to intellectual property that are extremely valuable. Or even just your own personal intelligence, your own personal mental ability. That can be a tremendous asset.

Your life, your health, your spouse, your children. These can all be assets. I consider my wife and children to be assets. They are extremely valuable and important to me. So when I think about asset protection planning, I don't think only about protecting money. I think about protecting my children.

Protecting my children's morality, their physical safety, their character. I think about how I can help grow that asset by investing into them, investing into their education, investing into their knowledge, investing into their life experience. And I expect that asset to pay off in the long run. I expect that asset to pay off and the pleasure of watching my children succeed in life.

I expect that asset to pay off and the financial assuredness, the financial security of knowing that my children would care for me in my old age. This of course is a concept that very few parents think much about in the modern world, but I think it's an entirely valid one.

Unusual but valid. You'll most commonly encounter this in the ethnic immigrants to the United States, where there's a much stronger family culture. And you'll usually find that parents will basically impoverish themselves for the education of their children, expecting that their children will provide for them in their old age.

In my opinion, that's a right and upright thing to do. It's nice if the parents don't need that support, but isn't that a nice safety net to build? Now look at the interplay of an unusual topic like that between financial planning and asset protection planning. If you're going to invest your time into your children, as you raise your children, you might pull back from your career and invest in their life, invest in their persons.

You might invest in their education with your time and with your money, opening up the door to many opportunities for them. You might spend tens of thousands or hundreds of thousands of dollars on their education. You might lend them money to establish them in a new business, give them property to help them be established in a new life.

How do you protect that investment? Well, your asset protection planning should include a consideration of that. This would range from protecting them from physical danger of a predator of some kind that might seek to harm them. But it also includes things like purchasing a life insurance policy on their life so that if they die prematurely, you can recoup some of your investment money, which helps to protect you from what is a great personal loss and a great financial loss.

You'll have to think about what the assets are that are important to you. But if you think about the term asset expansively, you will probably make wise decisions about how to protect them. This stuff is intuitive. The problem with many teachers of asset protection planning is they go so quickly towards the esoteric areas of finance and legal theory that require specialized knowledge.

They miss some of the low hanging fruit. That's why I'm laboring on this topic of physical safety. Your asset protection planning, you can justify when you're shopping for a car, you might carefully consider that that one car will more effectively protect the asset of your life and your physical health and your children from the risk of a crash.

And so you might make one car buying decision versus another because this car is safer than that. That's asset protection planning for mortals, not for lawyers, for mortals. And you should consider that. So think about what is an asset. What is the asset that you're trying to protect? So that's question number one.

What asset are you concerned with? Question number two, from whom are we protecting the asset? Or stated differently, from what risk are we protecting the asset? Who is your potential adversary? Your adversary will differ in different circumstances and not all planning techniques will help you from all adversaries. It's simply impossible.

It's very possible that you could buy a safe car and that would help you to protect the asset of your life, your physical health, your spouse and your children's lives and their physical health from the risk of physical injury or death due to a car accident. But that choice will make no difference whatsoever in protecting that car if you get behind on your payments.

If you get behind on your payments, the lender who actually owns the car, who has a lien on the car, that lender will come and repossess the car and now you'll be without a car. So you need to think about this expansively. And there's always a balancing act, a trade-off here.

Forgive me if this example gets too convoluted over something so simple. This is what you think of already, but I want to give names to it. So let's expand this example. You recognize the asset you're trying to protect is your physical life, the life and health of your family and your ability to create an income because for you to create an income, you have to be able to get to work.

So you're protecting your asset of income by purchasing a car. But you recognize, and so because you're protecting these things, you recognize you need a car, you need a reliable car and you need that reliable car to be somewhat safe. But you also recognize that if you go and you buy a brand new car to get the very latest and greatest, you have a risk of falling behind on that payment and not being able to afford it and thus you could lose the car.

So you know that you need a car that's safe, that's reliable, but it also needs to be financially modest in cost. And so when purchasing the car, you think carefully about that and you shop carefully for a good quality car that's a much more modest price that you can actually afford.

Now when purchasing that car, as I expand on the example of even how you finance it, in my recent course on credit cards that I delivered, one of the examples that I gave of how credit cards can allow you to borrow money more safely is credit cards are an unsecured loan.

And so they provide some additional safety for you to be able to own a car if you can buy it using credit cards versus a car loan. Because now the creditor, if you have to borrow money for the car, the creditor doesn't have that direct ability to repossess. Credit card company can't automatically repossess the car.

So now instead of financing the car with a personal loan at your local credit loan on a car loan, you finance the car with a cash advance on a credit card. Other dangers there, but it protects the asset of that car. And then in looking at it, you make sure that your ownership of that vehicle protects the asset.

So instead of owning that vehicle in your personal name, you register that vehicle into an entity, an LLC, a trust, some kind of entity to hold title to that property. So it's not even clearly visible to somebody who's doing an asset search on you what vehicle you own. It's not automatically registered to your driver's license so that when a private investigator goes down and pulls your driver's license and figure tries to figure out what vehicles you own, they can't automatically find that.

They have to come and perform some form of physical surveillance on you and your property to discover what car you own. And then you make sure that you properly insure that car by insuring the car, if it gets damaged or if it gets stolen or if it's in the shop.

And then you put in place other savings so that you can afford to rent a car when the car breaks down, et cetera. Now what I've done is just in that example, taken something fairly simple that we all do all the time, buying and selling cars, and I've made it sound very complicated to point out the components of asset protection planning.

But if you think about it, it'll allow you to make certain decisions step by step by step that will protect you. Now everything I've given to you in that example is part of asset protection planning. By choosing a quality, modern, safe car, you're protecting your savings from excessive mechanics costs, excessive repair costs.

By choosing a car with a good crash rating and excellent safety features, you're protecting your life. If you get in a car accident, which is a high probability throughout our lifetime, you're protecting your life so that you can still keep working and not be injured in a car accident.

You're protecting your family so that they can keep from being injured, hopefully, or keep from being killed. Think about the financial devastation that can occur if you're in a serious car accident. One of your children is killed. Your spouse is injured. You're unable to work for a period of time.

Think about the devastation that wreaks in your life. Now by owning that vehicle privately, registering it in a protective entity of some kind, personal property trust, LLC, then you're protecting yourself and that car against the knowledge of other people of your assets, which helps to protect you in civil litigation.

By not having financing on that car, you're protecting it from a creditor. By having a good insurance policy that protects your personal damage to the car and also your liability in the use of that car, you're protecting your other assets from any kind of negligence that may happen or any kind of liability that may be incurred through your driving.

And you're dramatically minimizing the impact on your life that can come from something as simple as a car. Now let's compare that with the behavior and the actions of people who are clueless. People who are clueless buy junky cars that look junky. This brings them to the scrutiny of the local police.

They drive with headlights out or license plate bulbs out, which gives the local police probable cause to stop them. Then the local police search the car, find problems, lock them up, and then they spend their life on the legal plantation. People who are clueless buy new cars, which might help them to avoid the notice of the police, but unfortunately, they wind up spending too much money, which allows them to not have any savings to protect.

And that might protect them physically, but then what do they do when they get in an accident and the insurance company just barely covers the cost of the car, but now they have nothing else to drive? And I could expand this on, but I've gone too long on this example already.

Just consider the decisions that people make and then watch how these decisions accumulate in people's lives. Prudent, careful people avoid many of the catastrophes that foolish, stupid, clueless, careless people are constantly engaged in. It's not an accident. There are things that are outside of all of our control, but that's the minority, not the majority.

So in asset protection, think about the asset that you're protecting and then from whom or what risk are we protecting the asset? Who is your adversary? Here, your adversary and your plan will vary depending on your adversary. Let's start with something like a simple thief. If you're concerned about protecting your assets from a simple thief, somebody who's going to steal your assets, your plan will vary.

If you're concerned about protecting your cash from your roommate or from a friend, then you'll hide the cash. You'll secure the cash using a lock strong box of some kind. You'll also protect yourself from identity theft by making sure you don't leave out important papers. Majority of identity theft, in my understanding, is committed by people who know the person.

So you don't leave unlocked drawers that have your personal private papers in them. You make sure to secure those things. That's different than if you're considering an adversary being a creditor, somebody who has lent you money. Protecting yourself from the claims of a creditor will involve certain steps of asset protection planning.

But that's also different than a civil litigant. You might have no debts today, but then you might be sued tomorrow and all of a sudden wind up in a losing position in a lawsuit owing now a creditor money because they've obtained a legal judgment against you. Not because you set out to borrow money on a car or a house or in a business deal, but simply because they were able to win their case against you.

And so your asset protection should involve planning against a civil litigant. Now a creditor or somebody who gets a judgment against you, that's very different than protecting yourself against the IRS. You can protect your assets against the IRS, but it involves different plans than a simple creditor. Or what about the police?

Protecting yourself and your assets against the police is extremely important. One of the huge personal concerns that I have is what in my opinion is the abuse of civil asset forfeiture laws in the United States of America. I hate it. So you need to understand what your rights are and how to protect yourself from the police.

Let me give you a simple, absolutely legally true example as to how this is so important. Let's say that you are accustomed to dealing in cash and because you like to get good deals on your vehicles, you're on your way to go and buy a $10,000 or $15,000 minivan and you've got a stack of $100 bills in your pocket.

Now in the United States, if you have in excess of $5,000 of cash, law enforcement can seize that cash if they become aware of it. So you're driving down the road on your way to go and buy your new vehicle and you've got $10,000 in your pocket. Not that big of a deal, really not.

But then all of a sudden you get pulled over, officer asked to search the car, they search the car, they find $10,000 or $15,000 of cash, they will seize that. And here's the way the law works. If law enforcement seizes that cash, you will have to prove that you acquired the cash through legal means.

The burden of proof is on you. Your money will be taken, you'll be given a receipt for the funds. And then if in the future you can provide proof that the money is so-called legitimate, as in bank statements showing that you withdrew the money a reasonable time before it was seized or pay stubs or tax paperwork of some kind.

If you can prove that the money is legitimate, then you might get the money back. But if you can't prove that the money is legitimate, then the money would be forfeited to the police agency that seized it. They would then use it and use it to fund their pension or use it to buy some new stuff or use it to enhance agency work in some way.

They can't use it to pay salaries, but they can use it for anything else. This is big business. And you should seriously consider the risk because police agencies around the United States seize millions of dollars every year from traffic stops, which is why it's so important that the answer is, "May I search your vehicle?" No officer, I don't consent to searches.

That's why that's such a big deal. But your protection from a civil asset forfeiture case is very different from bankruptcy. What is the risk? What about the risk of divorce? Protecting yourself against the risk of divorce involves multiple plans and multiple strategies. It could involve simply investing in the health of your marriage.

It could involve making sure that you're very, very careful before you enter into marriage. But it does also involve complex trusts, prenuptial agreements, et cetera. What about protecting your assets from monetary policy? One of the constant challenges that we face is simply protecting our money from the system that creates money.

In the United States of America, we live under an absurd system where inflation is built in. This is, of course, a hidden tax where every single year you lose money if you simply have money. You lose buying power if you have money. You lose buying power if you have U.S.

Federal Reserve notes, either in digital or physical form. And this is absolutely horrendous over time. If we go back 50 years from 2018, if in 1968 you had $100,000 saved, if you just kept that $100,000 stable, you had it in physical currency or in some kind of non-interest bearing account, today in 2018, 50 years later, you would have only $13,785 of buying power.

You would lose 86% of your wealth due to inflation over the course of those 50 years. Or if we flip those numbers on their head, just to illustrate it differently, what in 1968 you could buy for $100,000, today in 2018, you would need $725,399. Again, you would lose 86% of your buying power if you just simply held money.

So to protect that asset, you have to not only think about protecting it from the claims of creditors, protecting it from the claims of a divorce opponent, protecting it from a thief, protecting it from a civil litigant, protecting it from the police, but you have to think about protecting it from the actual non-governmental agency, the Federal Reserve, that creates the money in the first place because they will destroy its value over the course of the next 50 years.

That's part of asset protection planning. Now in addition, let's make it even worse. So you say, "I'm going to invest the money. Now I have to protect the money from a fraudulent investment manager. I have to protect the money from taxes and fees. I have to protect the money from the ravages of a health event or a long-term care event, etc." Now, I have made what in reality is somewhat simple.

It doesn't get simple when we get to entities and all the stuff we're going to talk about. But in general, you know most of those things already. I've made it complicated to point out to you how many different directions asset protection planning can take. You are the one who knows your situation.

And if you'll just simply stop and think, "What assets are you concerned about protecting? And from whom or from what risk are you concerned about protecting that asset?" 80% of these things, you don't need any professional help. You'll do it automatically. You know to protect your money from the ravages of monetary policy and the ravages of inflation, you have to invest it wisely.

You're probably already doing that. You know to protect your money from a thief and to protect your assets from a thief, you lock your car and you arm your security system at home. You know that... I'll stop with the examples. That's the simplicity of asset protection. What asset and what's the risk?

And then design the plan for that risk. Now in future episodes of the show, we're going to talk about a lot of different components of asset protection planning. And I will give you the juicy stuff. I will give you the entities. I will give you, how do you beat the IRS if they say you owe them money?

I'll give you all that stuff. Short answer, it's not easy. But I'll give you as much as I've got. But don't get overwhelmed in the details such that you procrastinate. Because as with most good financial planning, the people who are able to protect their assets are the ones who take action now.

Doesn't do you any good to close the barn door after the horse has escaped. You close the barn door when you put the horse in it. So from now going forward, think defensively. Be paranoid. Think what could happen. And how can I protect myself from this risk? Because the time to do good asset protection planning is now.

We'll talk about things like fraudulent transfers and laws. But if you are ever facing a legal risk or even aware of a risk, a litigant, too late. Not entirely too late. There are things you can do, but mostly too late. The time to take action is now. Don't procrastinate.

Hope you enjoy this series. I'm going to quit there for today and I'll be back with you soon with more details. As we go, I want to give you a closing plug and a sales pitch for my recent credit card course called How to Save Money and Borrow Money Safely Using Credit Cards.

One of the major benefits of credit cards is as a form of debt, as a form of financing, they can be both low cost and safe. Credit cards can help you protect assets from the claims of creditors. Let me give you a simple example. Let's assume that you have a credit card and you use that credit card to buy cans of Campbell's tomato soup, which you then use to stock your pantry.

You've taken a form of financing and you've turned it into food. Now if you go through bankruptcy, on the other side of bankruptcy, you'll probably still have cans of tomato soup in your pantry. You'll probably still have some bags of rice. And so even through something as awful as bankruptcy, maybe you were forced into bankruptcy involuntarily.

It's unusual, but it happens. Creditor drives a claim and you're forced into bankruptcy all of a sudden. We'll talk about bankruptcy planning in this series. At least you still have soup and your creditors aren't going to come and take the soup from your pantry. By understanding the laws, the nature of secured debt versus unsecured debt, you can make constant consistent financial moves that are in your best interest.

And if you don't know how credit cards work, you need to know. And the best way to do it is go to radicalpersonalfinance.com/creditcardcourse, sign up, buy my course, radicalpersonalfinance.com/creditcardcourse, get a 100% money back guarantee for the first 30 days, I guarantee you, you will like it, you will learn, and that knowledge will be helpful to you in the future.

Go to radicalpersonalfinance.com/creditcardcourse and buy the course today. Thank you. With Kroger brand products from Ralph's, you can make all your favorite things this holiday season, because Kroger brands proven quality products come at exceptionally low prices. And with a money back quality guarantee, every dish is sure to be a favorite.

Whether you shop delivery, pickup, or in-store, Kroger brand has all your favorite things. Ralph's, fresh for everyone. (upbeat music)