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Today, we continue our series, Asset Protection Planning for Mere Mortals. This episode is part three, in which we will discuss what is the problem that we are protecting against. By way of refresher, this series falls in under the rubric of avoiding catastrophe. Once you have done the hard work of earning money, once you've done the hard work of saving money and investing that money, you will become wealthy.

And now you have a whole new set of problems called how do I protect this wealth from the people who would love to take advantage of it? Now that protection will take many forms. In part one of this series, episode 601, I encouraged you to think very broadly about the topic of asset protection planning.

I asked you to ask two questions. What is an asset? And then from whom or from what risk are you interested in protecting the asset? And that risk will vary depending on your situation. For some people, the risk is civil litigation, which is the bulk of what we'll be talking about today.

For some people, the risk is your deadbeat nephew coming and asking you for money that they're gonna go and squander. For some people, the risk is physical theft, the fact that your roommate may go through your private effects and pilfer your money if you have it saved there. So of course, when I use that very broad discussion of asset protection, that you could identify the risks that would be appropriate to you.

In part two of the series, episode 602, we talked about the legality and morality of asset protection. I asked two questions. Is it legal to engage in asset protection planning? And I briefly defended the answer, yes, it is legal to engage in asset protection planning. And as this series goes on, you'll hear more and more of the legal strategies and you'll see, and I trust be entirely persuaded that it's absolutely legal for you to engage in asset protection planning.

Part two of that question where I discussed, is it moral for you to engage in asset protection planning? That's one that is of course more subjective and we won't be talking about it much in this series, but I defended the answer, yes, it is moral because you have no duty to make it easy for people to steal from you.

And it's your job, you can always choose to give your money away if you want to, if you are found wrong or if you've committed wrong, it's always your choice to give the money away. Even if you weren't wrong, you can always choose to give the things that are yours away.

But it's not right for you to make it easy for people to steal from you. And there may be cases where you can be found legally in the wrong, where you know that you are morally in the right. And in those cases, I believe you have a moral duty, a moral obligation to fight against the moral injustice, no matter what the legal consequences are.

So I defended the thesis that yes, it is moral for you to engage in asset protection planning because you will always be in the situation where you can choose whether to give money. You can choose whether to pay a claim. And I want to put you in a situation where you're strong so that you can do what's morally right, no matter the course.

Today in this episode, part three, we're going to talk about what is the problem we are protecting against. And my focus is to try to instill a little bit of concern into you. I hesitate to use the word because I don't like selling fear, but I think I'm going to use it.

I want to instill a little bit of fear into you to inspire you to do some proactive planning by talking about what the problem is that we're actually protecting against. Because if you don't understand the problem, you may not understand how severe the problem actually is. You might think, well, I understand why some high-flying heart surgeon, who everyone knows has lots of money because after all, they're a heart surgeon, I understand why they would engage in asset protection planning.

And I understand why that fraudster businessman would engage in asset protection, but come on, I just have a few hundred thousand dollars saved, a little bit of money in my IRA, working towards financial independence, got a rental house, I don't have any big risks. And I want to disabuse you of that lackadaisical attitude in this show by talking about the problem.

I'm going to read you a number of examples from various asset protection books to help you to understand how severe this is. Quick comment on asset protection planning. The entirety of this series is put together by me based upon research, not based upon practice. I've never engaged in asset protection planning.

I'm not a lawyer, I don't write trusts, it's not what I do. This is simply an interest of mine, and I believe it should be an interest of other people. And as such, I've educated myself about it, but I've educated myself about it entirely through reading, never through actual practice.

Now, reading can be very helpful. It's helpful because it gives you a broad survey. And if you read a lot of stuff, as I do, you find a lot of really bad books and a lot of really good books, and you kind of learn to pick and choose. And in many ways, when you read extensively about a subject, you can start to see the themes that are the same that everyone agrees on, and then those themes that are more questionable.

In this series, I'm not going to be engaging in anything that's questionable. I'm focusing on the things that everyone agrees on. But I will refer you, you always need to go and work with a competent legal advisor, financial advisor, most probably attorney specializing in asset protection planning. There are many things you can do yourself, but you will always need to go and get specific legal counsel, because the variety of things that can affect your situation are so extreme that there's no possibility that I can teach you effectively through all those things.

You need an expert in this area for many of these things. But in that extensive reading, I've come to see that there are usually about five or six ideas that everybody seems to agree on as far as why do we face this problem. And I want to go through those with you.

The first problem is that we live, in the United States of America in 2018, we live in a victim-oriented society. We live in a victim-oriented society. Now, there are two ways that you could take that. For example, we could take that idea of victim orientation in the direction of you're saying, we live in a society that is sensitive towards victims, that wants to see victims protected.

I think there's probably a sense in which that's true. And I'm proud to live in a society like that. I want to always be one to stand against injustice. I want to always be one to stand up for what is right and to defend the victims, to defend the helpless, to defend the innocent, to defend especially those who can't defend themselves.

I want to stand with the victim. So I appreciate how in many ways we do that, perhaps in the United States, perhaps better than in the past. But there's another sense, and this is the sense in which that term is being used, in which being in a victim-oriented society is not good.

And it's a sense that in our current society, many people see themselves as victims who are helpless. And they in fact want to be victims because by nature of being a victim, they gain other forms of credibility. Now, the most important expression of this in our context is being the victim of something over which you can sue and get money.

And we see that enhanced constantly. We see that discussed constantly. Perhaps the most annoying examples of this, and you understand why an attorney would engage in this form of advertising. But what I find very difficult to deal with is how crassly many plaintiffs' attorneys advertise themselves to potential victims and how transparent they are about the financial motivation.

Where I live in Florida, there's a series of billboards put out by a local law firm. And the billboards feature in very large letters, well, they feature a picture of a person, just a normal snapshot, not a model, a real person. And then in very large letters, they feature something like this.

Got me $632,000. Or got me $1,322,000. Or got me $175,000. And the entire point is to appeal to that larceny in the heart of many people, I'm gonna get mine. Gonna get me some. I find that pretty offensive. And you understand why the law firm uses that because then they get lots of phone calls from many people who were victims or who believe themselves to be victims, and they can sort through that.

But this victim-oriented society has created greater dangers. And it seems like many people don't wish to take personal responsibility for things they can take personal responsibility for. We joke about somebody having a slip and fall on your front sidewalk. It's only funny because it's true. Now, thankfully, most people who are walking up your sidewalk and slip and fall and hurt themselves, thankfully, most people would say, I should have been more careful.

But there are a lot of people and a lot more people today who will say, the sidewalk owner should have been more careful. And they'll look for a lawsuit. Now, I don't fully know what the source of this victim-oriented society is. I don't know. But it seems as though the historic US-American ethos of we can do it, pull yourself up, work hard, you can do it, is largely less strong than it once was.

And there's much more of an ethos of you're a victim. You've been victimized. You're the 99%. You've been victimized by the 1%. Perhaps it's related to social theory, the most common social theory that has been taught to US-American college students for many decades is postmodernism and the modern expression of that postmodern intersectionality, where the more points of victimhood you can have, the more sympathy you'll get.

You see this oftentimes in modern news stories. At this point, I never trust a single news story from the United States related to racial disparagement, something like that. Someone says somebody called me a racial name or somebody made some claim against me. It seems like when you start shutting this out, I don't know what the percentage of it, it seems about perhaps 70% of them or 80, probably it's probably a Pareto principle, probably 80% of them, more and more seem to be faked.

And that is harmful to the 20% that are real, but the 80% fake it so that they can acquire the status of being a victim and so that people will dote on them. I don't know what it is. You form your own theory, but by living in a victim-oriented society where there are many people who see themselves as victims, that creates good fodder for number two, which is plaintiff lawyers.

Most books refer to this as a litigation explosion, the time that we live in being a litigation explosion. Now, why is this? Who knows what the source of the problem is? It could be some of the things that you often see cited. There's a breakdown of traditional values, and by that you mean traditional Christian values, traditional Western Christian values.

As the hold of Christianity on Western society has slackened and in many cases completely disappeared, the concept of personal responsibility and the concept of seeking forgiveness even in the face of injustice has largely diminished in favor of much more of a get-what's-mine perspective. Christians face serious problems when it comes to the topic of suing one another.

There are strong biblical warnings against engaging in lawsuits against one another, and this creates this slowness, historically, for people to sue one another. Now, that seems to have changed, especially as Christianity has lost its hold on Western society. A major influence, perhaps, could be the loss of a sense of community.

There was a reality in much of US American history where people lived in a local community. That local community was very much human-sized, anywhere from hundreds to thousands of people, which meant that in that local community, you knew people and you had a reputation, and that local reputation mattered.

If you were somebody who brought a lawsuit against somebody and that lawsuit were frivolous, that would harm your reputation and make it very hard to live in a local community. There are many, many communities around the country that it still works that way. But as we increasingly live in an urban society, as we increasingly live in a society filled with many people, then it's much harder for that local reputation to be found out.

Your reputation now is not in terms of your city, it's more in terms of your profession. And as that local sense of coherence changes and falls apart, especially as most of us more identify with our political party or with our friends on Facebook, et cetera, that local sense of community diminishes, and that leads to less of a prohibition or slowness about suing one another, perhaps that.

There's just a lot of lawyers. One of the biggest challenges facing the country right now is the sheer number of attorneys. And there are a couple of expressions as far as why this matters so much. As tens of thousands of new lawyers graduate from law school every year, they have to find something to do.

They have to find some way of earning a living. And of course, there are many specialties in law, but perhaps the biggest headlines often come around attorneys who can win big judgments. And there's a huge financial incentive for an attorney to take on cases that result in them possibly receiving a large judgment.

I had several clients who were primarily plaintiff's attorneys where they did this, and they made a lot of money. And it was very much high-flying work. We have lots of lawyers coming out and then trying to figure out how do I make a living? Well, as those lawyers go out through society, they have to find more and more cases.

But all the good cases, the cases where there are clear forms of right and wrong, clear forms of negligence, those plaintiffs can take that to any law firm in the country. And so they usually, those cases go to a small number of well-established and famous lawyers. And especially if you're up against somebody who's done serious wrong, et cetera, because the plaintiff is not paying the bill, usually, the attorney is taking it on a contingency fee basis.

The plaintiff just simply has to bring the case and they can pick and choose their lawyer. Well, what about the bottom 80% of lawyers who are looking for work, but they can't attract the good cases? Well, they have to go out and find more and more cases. They have to go out and try more and more cases.

All the easy cases are gone, and they go to the top few percent of law firms. So now you have local attorneys trying to figure out how do I come up with something else? And they have to figure out how to make a living. And so you have just this huge proliferation of plaintiff's attorneys.

And all of them are hungry for a lawsuit. They're all putting up attorneys. They're sorry, they're all putting up billboards. Got me $240,000, now come and get you some. And when you look at the incentives of the case, and the actual incentives that the attorney faces, the plaintiff can bring the case.

So the attorney advertises, they talk to lots of plaintiffs, and the attorney has a choice. Do I think there's a good case here and do I want to take it? If they take it on, the attorney bears all of the financial risk of the case, the plaintiff doesn't bear that usually.

And if it's a bad case, then the plaintiff does, the plaintiff bears it on an hourly fee basis. But the attorney bears the risk. And when the attorney follows through on the case, they're hoping for many potential outcomes. They're hoping to settle the case before it actually goes to trial.

And they know the power that an attorney, a good attorney has with a legal right of exposing somebody, they know the power that they have up against a normal person. It's absolutely profound. And so when you have these major, just massive proliferation of plaintiff's attorneys, and as a moment, massive new expanding theories of liability, which is the next one, you have a lot more potential for many civil cases.

Again, the next one is expanding theories of liability. As US American law has developed in the past, over the past decades, the traditional and normal ideas about who is liable for behavior have been superseded by expanded theories about who is liable for behavior and under what circumstances. And it's very much driven as you have more and more attorneys who are taking these cases and looking to try to figure out how can we find some negligence somewhere by somebody who has money.

That's led to these ongoing theories. And the challenges, in my reading of this industry, it's currently unknown even where some of these limits of liability stop. The next most important one you have to think about is the idea of deep pocket theory. Who has a deep pocket? And these two go together.

I'm gonna read you some examples here from a few different asset protection books that will give you an understanding of how these two play together. If you have somebody who has deep pockets, and if you can find some theory of liability to apply to them, then you can have a successful lawsuit, which can make you, if you are a plaintiff's attorney, or you, if you are a victim, quite a bit of money.

And the deep pocket theory has to do with who has the money to pay? If you don't have the money to pay, no attorney is going to take their time to try the case. Why would they spend months and months and tens of thousands of dollars, if not hundreds of thousands of dollars to take a case where they'll get a legal judgment that they can't enforce?

Let me read you a section here from an estate plan, sorry, an asset protection planning book from a chapter called "Searching for the Deep Pocket Defendant." Before I do, I need to give you two minutes of warning on stories. I'm gonna read you a few stories, but I would caution you to always be careful in accepting at face value any particular legal story without actually going and reading the legal case yourself.

Here's the problem. With legal news articles and legal stories, there are a lot of them that are reported sensationally, that are truly sensational. They are truly astounding when you actually look at it. The problem has to do with when is the reporting being done and how accurate is the actual reporting?

I'm so grateful when I was in college that I had a business law professor that forced us to start reading some cases. And one of the cases we read was the case, the famous McDonald's hot coffee case, where a lady spilled hot coffee in her lap and sued McDonald's for selling hot coffee.

I don't know of a case that's more cited as ridiculous than that particular case. But in actually reading the details of the case, I came to believe that the lady was right in her lawsuit and justice was basically done. The problem has to do with what historical perspective do you have?

So the facts of the case, been years since I've read it, you go and read it yourself, but I'm pretty sure I've got the facts good enough that I can relate them to you with accuracy here in this short story. This elderly lady did have hot coffee and she spilled it.

She spilled it in her lap and suffered serious burns to her genitals, to her inner thighs, et cetera. After the burn, she found out that McDonald's had at that time a practice of serving their coffee at a much, much higher temperature than most of us drink coffee or ever have coffee.

It was much closer to boiling because they wanted to make sure they were always serving hot coffee than we're accustomed to. And they didn't have any extra labels as to far as how hot that was. Now, you know as well as I do that if you have a cup of coffee from your home coffee maker, not a big risk.

If you spill it on yourself, you might get a little bit of a scald, but it's not gonna be serious burns. But if you had a pot of just under boiling water on the stove and you spill it on yourself, you know there's a bigger risk and you would be more careful with that.

That was the basics of her case. And I believe she just simply wanted McDonald's to pay for some of her hospital bills. Well, McDonald's fought, and because McDonald's fought and pursued a very elite, aggressive, corporate, you know, this is a ridiculous lawsuit perspective, then she sued all the way.

The jury was so offended by the behavior of the McDonald's defense attorneys that the jury awarded the lady many millions of dollars for her injuries. And that was the headline that got reported. Much later, those damages were adjusted down to a much more reasonable number, but that never got reported.

So what happens a lot of times in these cases is, first of all, what are the actual facts of the case? You need to read the facts and understand the facts to understand was there actual liability here? Was there actual circumstances? And people will be very selective in reporting the facts when talking about legal cases.

The second thing is, what actually happens in the lawsuit? Were the awards and the damages that were actually assessed reasonable? And oftentimes, the jury may suggest a much higher reward that the judge later adjusts. So I'm square in the middle on this stuff. I have lost much confidence in the modern US American legal system, but I still see enough people who are working hard to find justice that I still have more confidence in a lot of people.

And I would caution you, many times cases are reported in absurd ways that when you go and read the actual case, the facts don't bear out that stilted description of it. Now, with that as the case, let me read to you a few pages from this particular book by an estate planning attorney in a chapter called "Searching for the Deep Pocket Defendant." He writes this, "The reality of our legal system is that people are named as defendants in lawsuits, not because of their degree of fault, but because of their ability to pay.

When an attorney is approached by a potential client who is claiming injury or economic loss, the attorney will consider whether a theory of liability can be developed against a party who can pay a judgment. This is called the search for the deep pocket defendant. The deep pocket defendant will have substantial insurance coverage or significant personal assets.

The measure of an attorney's skill is his ability to create a theory of liability, which will connect a deep pocket defendant to the facts of a particular case. Here is an example of what might happen in a particular case. Mr. Wilson is driving in his car. Mr. Fineman runs through a stop sign at an intersection, smashing into Wilson's car and causing Wilson severe injury.

From his hospital bed, Wilson Googles local attorneys and calls the first attorney he sees, Alan Abel. He is what is known as a contingent fee lawyer. He works for a percentage of the ultimate recovery and determines whether to invest his time and money in a case based upon what his expected return will be.

Since the time and expense of preparing for litigation can be considerable, an attorney cannot afford to take a case that is not likely to pay off. Remember, no recovery, no fee. Usually, the attorney advances all costs and expenses, and in exchange, he recovers these costs, plus 30% to 40% of any amounts that he can get from the defendant.

Before Abel decides to take Wilson's case, he will want to do some serious research to determine the merits of the case. Not the legal merits, the financial ones. He will want to know whether Fineman has substantial assets in order to make the case worthwhile. Abel runs a financial search and determines that Fineman has no insurance and no significant assets, such as a home or a retirement nest egg.

What happens? Is that the end of the case? As for Fineman, it probably is the end of the case. Abel is not going to waste his time suing someone who can't pay. But Abel is not going to give up so easily. He has a client with substantial injuries, and that means a large damage award, big bucks.

But first, he has to find someone who can pay. Here is how a successful lawyer would analyze the case to try to draw in a deep-pocket defendant. Was Fineman on an errand for his employer at the time of the crash? If so, the employer can be sued. Did Fineman have any alcohol in his system?

The restaurant that served him may have liability. Was Fineman on any medication? The pharmacist, drug company, or physician may have potential liability for failure to provide warnings, or for writing or filling the prescription improperly. The stop sign Fineman ran through was in a residential neighborhood in front of someone's house.

Did the homeowner properly maintain his property and clear his foliage to provide an unobstructed view of the stop sign? If not, there is a case against the homeowner for negligence. Did the municipality take due care in the placement of the stop sign? Should it have used a traffic light instead?

There may be a case against the city or county. The driver's side door of Wilson's car collapsed on impact. There is a possible case against the manufacturer for not making a more crash-resistant frame. Do you see how far we are moving away from Fineman, the person responsible for the accident, in an effort to tie in a remote deep pocket defendant?

In any rational legal system, Fineman would be regarded as the wrongdoer. He disobeyed the traffic law and he caused the injury. Instead, we have an attorney trying to force the blame onto someone else who wasn't at the scene and doesn't even know the people involved. The example that we just gave you is taken from a real case.

Guess who ended up as the defendant? In the actual case, the defendant was Fineman's 92-year-old widowed great aunt Ellen. As it turned out, she had purchased the car for Fineman as a gift to him. Abel's private investigator searched the assets of Fineman's relatives and found that Aunt Ellen had a house that she owned and some savings in the bank.

She was named as the defendant in the case and was found liable on a theory called negligent entrustment. The jury found that she should not have bought the car for him. She should have known that he was a careless driver and might cause an accident. She caused the accident by buying him the car.

The verdict was for $932,000 and Aunt Ellen lost nearly everything she owned. That comes from a book by Robert Mintz. You can see why these two things have to go together. Expanded theories of liability and deep pockets are the key to who gets sued and why. We read another few examples from a different estate planning, or asset protection planning book, where the author is talking about this problem and talking about why the concept of indirect civil liability, which is a liability that attaches to someone other than the person who commits the legal wrong, the tort, is perhaps the biggest threat to wealthy people because it allows plaintiffs to attach liability to almost anyone who has vulnerable wealth rather than to the person who actually committed the offense.

Indirect civil liability, excessive judgment awards, and the following factors have turned our legal system from one of justice to one of redistributing wealth from the haves to the have-nots. Most civil plaintiffs' attorneys are paid a percentage of amounts collected from litigation. So the larger the judgment or settlement, the more money they make.

This in turn means attorneys try to sue as many people as possible in any given case. This is the reason for various theories of indirect liability. Judges support theories of indirect liability which attach to the person with the most money rather than, or in addition to, the person who committed the offense.

Juries decide on emotions. A Robin Hood mentality rather than sound legal reasoning are unpredictable at best and catastrophic to a defendant's wealth at worst. Case in point, a large lawsuit against a giant stadium concession company resulted in a $110 million judgment. And the New Jersey Supreme Court ordered a retrial because of several legal errors by the Superior Court's presiding judge which led to such a high verdict.

The injured party in this lawsuit was a two-year-old girl who was struck by a drunk driver that bought alcohol from the concession company. No one will say that the permanent paralyzation of an infant is not a great tragedy. However, there's a strong trend in litigation that links emotionally charged cases to unusually high judgments.

Why was the drunk driver not sued? Why was the concession company's employee who sold the alcohol to the drunk driver not sued? Why only the deep pocket defendant? How many people lost their jobs because the deep pocket had to pay $110 million to the plaintiff which forced them to lay off employees as a result?

One only has to randomly read a few civil cases to see how thoroughly established indirect liability has become in our legal system. Study enough of these cases and you see many examples of indirect liability. An employee causes damages, so the employer is liable for the employee's actions. A vehicle is involved in an accident.

The owner is liable even if they're not driving it. A landlord fails to maintain property. For example, they don't put salt on an icy sidewalk and someone is injured. The non-managing property owner may be liable. An individual buys a property for someone else. The recipient then intentionally or unintentionally uses that property to injure themselves or another.

For example, you give a hunting buddy a gun and then he shoots himself or someone else. The gift giver is liable under the theory of negligent entrustment. Yes, people have actually been sued for giving gifts. A person refers someone to a business or service that ends up committing a tort.

The referrer can be sued as a result. Litigation from this type of liability is common, especially among professionals such as CPAs, financial advisors, and attorneys who refer clients. These are only examples of indirect liability. Indirect liability can be further broken down into subsets such as lingering liability, which we'll now discuss.

Lingering liability is a liability that may be triggered many years after the tort or negligent act was committed. To explain lingering liability, let's examine a Texas case from several years back. A home builder built a home to sell it. He subcontracted another company to put in a septic system.

Instead of installing a proper septic system, the subcontractor cut corners to save money and used a large propane tank. 10 years later, the propane leaked, raw sewage seeped through the home's foundation and into the walls. Everyone living in the home, including an eight-month-old baby, developed staph infections, which required hospitalization.

The original builder had operated as a sole proprietorship when the home was built, was sued for a very large sum of money, and lost, despite the fact that another company put in the faulty septic tank. In this situation, we must ask ourselves, if at some point in the 10-year period between when the home was built and the septic tank leaked, I had sold or resold the home, could I be named as a party on this lawsuit?

Shouldn't a real estate property inspector have been able to determine an incorrect septic tank was installed? Hint, when's the last time you've seen a real estate inspector dig up a yard to look at a septic tank? The answer to the first question is yes, you could be sued if you sold a property with major defects, even if you didn't know about the defect, and even if a qualified professional inspected the property.

Remember, in court, the facts are not decided by real estate inspection experts. They are decided by a jury who may not have the faintest idea about real estate. The jury will most likely think, however, that someone who owns rental units or buys and sells real estate is rich. They're angry that an eight-month-old baby was hospitalized.

Whether or not you could have detected and corrected the problem is beside the point. Would this jury play Robin Hood? Would they take from the so-called haves, you, and give to the have-nots regardless of fault? Who's regardless of fault? In a country where over 30 million lawsuits are filed each year, it happens many times each day.

A similar situation happened to one of our clients long before he'd seen the need for asset protection. His case falls not only under lingering liability, but also under something we call expanded liability, another type of indirect liability. Many years ago, he operated a car dealership as a sole proprietorship.

He bought a used car with damaged brakes, sent the car to a mechanic shop for repairs, and then sold the car. 10 years later, the car was involved in an accident, which, unfortunately, resulted in multiple fatalities. The car brakes had failed. Even though the brakes had worked perfectly for 10 years, guess who got sued?

That's right, the person who had operated his dealership as a sole proprietorship. Fortunately, he only lost $50,000 in this case, but it could have turned out far worse. Notice that his company wasn't even the one that fixed the brakes, yet it was the one that got sued. This is a perfect example of expanded liability.

People are sued under theories of expanded liability because attorneys collect a percentage of the judgment or settlement award amount when they sue, so they have an incentive to sue as many people as possible for as much as possible. More people sued equals more money, which means the attorney gets more fees.

Another highly public case more clearly illustrates how theories of expanded liability are used to go after deep pockets. Earlier, we discussed a giant stadium concessionaire whose employee sold beer to an already inebriated man during a game. After the game, the intoxicated man was involved in an accident, resulting in a fatality.

The drunk driver was broke, and even though he went to jail, the plaintiff's attorney didn't pursue anything beyond his insurance company's $200,000 payout, nor did the employee who sold the beer pay a dime to the defendant, despite his poor judgment. The employee's large and wealthy employer, however, lost the lawsuit and was ordered to pay $110 million to the plaintiff.

Who had the money? Who got stung? If you are only remotely connected to a lawsuit and no one else involved has significant assets but you, who do you think the plaintiff's attorney will pursue? That excerpt comes from a book called Asset Protection in Financially Unsafe Times by Arnold Goldstein, who is a prominent author who's written a number of books on the subject, and Ryan Fowler.

I hope that you see with those examples how difficult this problem of various theories of liability really can be. In the past, I've done a long series of shows on law enforcement, protecting yourself from legal risks. And the reason I did that was to try to impress upon you the reality that you are vulnerable.

You are a criminal. Under current US American law, you are a criminal. Now, we don't know what law you've broken and neither do you. But if we knew every detail of your life and if we had time and you had notoriety, we could find a whole bunch of things to charge against you and find you to be a criminal, which is why it's so important for you to protect yourself from those risks.

That's hard for a lot of normal people to accept. That's hard for a lot of people who think, I'm a good person, I'm a decent, upstanding citizen, I obey the law, but yet you're saying I'm a criminal? Yes, you are. Today, you are committing felonies. You just don't know what they are and neither does anybody else, until or unless you allow yourself to be pushed under the lens of investigation and then there's all kinds of things that can be found.

So that's the parallel in the criminal world. The same thing applies, however, in this context to civil litigation. You are liable. You have been negligent. Somewhere along the line, at some point, even though you probably don't even know it, there is a set of facts that could be drawn against you for some of your behavior at some point in the past years.

And these things compound. You didn't realize it at the time. You were just operating under a normal life. You were just simply saying, I'm just being a normal person. I'm trying to be prudent in all my affairs. But you were found negligent somewhere. You could be found negligent by a motivated attorney with a set of facts, who has a victim and a sympathetic jury.

Because there are enough proven legal theories that could be found to hold you responsible. That's why asset protection planning is so important. Because you can't just be prudent. One of my pieces of advice is be prudent, be careful, be thoughtful, be considerate. But that's not enough. It's not enough just to be a prudent, careful person.

Because when you're faced with this monstrosity of indirect liability, lingering liability, et cetera, prudence is not enough. It's not enough. That's the problem. You might be a careful person. You might be a prudent person. You might be careful in all your hiring practices. But if you hire people, in some fact patterns, you are liable for the behavior of those people.

Personally, you're liable for your employees. You're liable for your equipment. You're liable for all kinds of things. There are enough examples that we could find. Let me give you two more. Back in the late '90s, there was a case in the United States of America where a man named Wendell Williams went on a rampage with a gun and killed two people.

He went on a psychotic rampage and killed two people. He sued a former psychiatrist of his named Dr. Myron Lipson. You can go back, there's a 60 minutes episode of this that was done on the case. If you can go back and find it. So he sued his psychiatrist.

When Dr. Lipson first met Wendell Williamson, Williamson was in law school. He was 26 years old and he was in law school. And he was brought in for an appointment because he had disrupted a law class claiming that he had powers of telepathy. And so they brought him in to the psychiatrist for an emergency appointment to try to help with him.

Now over time, the psychiatrist worked with him. He evaluated him over time, diagnosed the patient as having paranoid schizophrenia and prescribed antipsychotic medication. And evidently the patient showed signs of improvement. Dr. Lipson went on to retire and he instructed his patient to continue treatment with his successor who was working there at the clinic.

The Williamson, the shooter, never after Lipson retired, never went to go back to see the successive psychiatrists. And then he stopped taking his antipsychotic medication. And then one day he got a gun, he went out and shot and killed two people. So he sued the psychiatrist claiming that the psychiatrist should have followed up and made sure that he see the successor physician and should have warned him more about the potential of his psychosis, that he would cause more problems.

And at trial, Williamson was awarded $500,000 of damages from Dr. Lipson who had not seen him for eight months before the shooting and whose orders of medical care the patient had ignored. Now the problem in this case, Dr. Lipson was openly acknowledged in the court to be an absolutely superb psychiatrist, to be a phenomenal practitioner, to be very, very prudent.

And at the end of his career, he did the right thing, retired from practice, did the right thing with his patients. That's tough. You know, one of the hardest things, anyway, that's tough. The point is it was rightly a scandal at the time, front page news, there's a reason why it was on 60 Minutes, but yet still Lipson was found guilty.

If that doesn't chill you to the bone, it really should. Let me read you one other example. The second example I said, and this comes from the Mintz book. A wealthy client, Alan, invested $10,000 in a software development business owned by a college acquaintance. Mark, Alan received 2% of the stock in the company, put away the certificates and didn't think about it again for several years until one day he was served with a lawsuit.

The suit alleged that the company had breached a contract to develop a particular program for a customer. The failure to deliver the program on time had cost the customer millions of dollars. He was now suing for $25 million. Alan was named as a defendant, together with the company, which was primarily a service business with no substantial assets.

It was clear that the real target in the case was Alan and not the company. Alan had $3 million in stocks and bonds and several brokerage accounts. And this was the prize the plaintiff was after. The case was disturbing. From a legal standpoint, Alan, as a minority shareholder, not even an officer or director, had no liability for any obligations of the company.

Even if the damages were caused, as alleged, Alan had no input or responsibility for the operations of the business. The case had been filed solely because the other side had run an asset search on all of the shareholders looking for a shakedown target. And they hit the jackpot when they found Alan's accounts.

The attorney for the other side later admitted to us that if they hadn't found Alan's money, they wouldn't have filed the case. They had nobody else to go after. But now they had a perfect setup. Although Alan had no real liability, what happens in court is often different than what we think should happen.

As a named defendant in the case, and the only one with money, Alan faced a difficult choice. Fight or settle? If he fought, there was a risk that he could lose the lawsuit with damages of several million dollars, plus attorney fees. That would probably wipe him out financially. If he won the case, it would still cost $100,000 to $150,000 in legal fees and expenses, and would absorb much of his time and emotions for at least the next few years.

The lawyer for the other side knew how to play the game. After several months of painful negotiations, Alan settled the case for $450,000. It was difficult for him to pay the money, mostly from an emotional standpoint, because he had done nothing wrong. But he was trapped and outmaneuvered, and he had no choice.

By holding his money in an unprotected form, easily discovered and reachable, he was a vulnerable target. The proper strategy, and the one Alan now uses, is to limit access to personal financial information and shield assets from potential claims. That will minimize the threat from these types of cases. That is the end of the stories I will share with you.

If you go out looking for them, you will find many yourself. I am convinced, at this point in time, that it is impossible, no matter how prudent and careful you are in your affairs, as all of us try to be, it is impossible to be sufficiently prudent that you would eliminate the possibility that you would be found guilty in some form of case.

So this is the same conviction I came to with regard to criminal law. Why did I talk about, is the importance of you protecting yourself from being arrested and protecting yourself from the police? Because you are guilty today. Same thing, you are negligent and liable today. So, since you don't know where those risks are, you don't know what they are.

You don't know what happened 10 years ago when you were operating a business without a corporation. You better get busy today and do your best to protect yourself when we're asset protection planning. That's the major problem we're protecting against. As I close out the show, I want to emphasize to you, there are other risks that also fall in under asset protection planning.

Thus far, I have focused exclusively in this show on civil litigation, the concept of negligence, liability, et cetera, and you're facing civil litigation. But there are other risks which also have to come into play. For example, bankruptcy. Now, I hope that you take my advice that you don't borrow money recklessly, that you don't put yourself in a circumstance where you are going to be finally, you're living dangerously and you're just thinking, "Well, I'm just going to file bankruptcy if something falls apart." But the reality is many people wind up in bankruptcy who were not reckless, who were not negligent.

Now, that can be because of a medical condition. That can be because you were forced into bankruptcy by somebody who wanted to collect on some debt of some kind. So, bankruptcy planning is another risk as part of this. Any of us could wind up in bankruptcy, even if you don't borrow money.

I repeat, any of us, no matter how much of a Dave Ramsey acolyte you are, 'cause you don't borrow money, any of us can be forced into bankruptcy. That is another huge risk. And bankruptcy planning has to be part of asset protection planning. Another major risk involves divorce. One of the biggest challenges that we face in the modern world is protecting assets from divorce.

Very, very difficult area of practice. Because of course, none of us think we're going to get divorced, otherwise why would we have gotten married? None of us want to get divorced, but no matter how diligently you and I work, no matter how hard we are at maintaining our marriages, loving our wives, loving our husbands, making sure that you're diligent, can't predict what the future holds.

You cannot predict it. And though you were not at fault in a divorce, you can't control another person. And yet your assets can be utterly wiped out by divorce. So do we have to bring in divorce planning as a component of asset protection planning? It's a major, major challenge.

And then finally, of course, tax issues. Dealing with the IRS or local tax authorities or state tax authorities, it's tough. And don't think for an instant, though you are honest and upright in all of your dealings, don't think for an instant that the IRS or your local state tax court is your friend.

There are many, many examples you can find of egregious abuse by taxing authorities. And here's the problem. If you want to talk about an opponent, a legal or financial opponent that is one of the toughest, the IRS has immense latitude, immense latitude with their ability to come after you.

And I consider some of the perspective, did you know if the IRS alleges that you owe them more than $50,000, then they can cancel your passport and refuse to allow you to leave the country? Someday in the near future, I'm gonna do a show on debtors' prisons. A lot of people have this idea, this misconception that debtors' prisons are a thing of the past.

Nonsense. They just look different than they did in Charles Dickens' day. But one of them is dealing with the IRS. There are others as well, especially involving divorce courts and child support alimony payments. So we'll do that show another day. But another one I have is slavery. Slavery hasn't disappeared, it's just changed forms.

Now we put slaves in prisons, keep 5% of the US population there, instead of keeping slaves working in the fields. Anyway, we'll do those shows another time. So the IRS is a tough opponent, and you have to consider tax planning and dealing with, if you're in a battle with the IRS.

It's not enough for you to be above board. It's not enough for you to declare all your income, disclose all your assets everywhere in the world. It's not enough for you to do the right thing with the IRS. You still face risk with them. Two stories I'll read you from the end of the Goldstein Fowler asset protection book where they're dealing with this topic of asset protection and the IRS.

It says, it's important to preface this chapter by saying that if you are liable for a tax, you should resolve the issue by paying or otherwise settling the debt. In egregious circumstances, thwarting the IRS's efforts to assess or collect a tax may constitute a felony. At the same time, there are instances where the IRS is overaggressive in its collection efforts and/or sometimes erroneously pursues people for taxes they don't actually owe.

Despite a plethora of cases that demonstrate this, some think they have nothing to fear from the IRS so long as they are honest taxpayers. The following real life experiences show this is simply not so. An attorney named Jeff is married with four children. His wife Linda is a stay-at-home mother who has not worked for many years.

One day to her surprise, she received an IRS 1099 form in the mail generated by a company she'd never heard of reporting that the company had paid her $350,000. She does not report this as income since she never received any money. The IRS, however, claimed she was liable for over $100,000 in taxes based solely on a one-half page, unsigned document sent out by a company that shortly thereafter went out of business.

Jeff used his legal expertise to argue that the IRS has no proof of Linda receiving such income. In fact, he said if the IRS could locate the money, he'd split it with them 50/50. The IRS disagreed without even auditing the company that generated the form and a legal battle ensued.

Over eight years later, the issue remains unresolved. Fortunately, Jeff has experience representing clients with IRS problems, which saves them tens of thousands of dollars in attorney's fees they'd otherwise have to pay. Nonetheless, Jeff never figured he'd have his own wife for a client. The IRS contacted Chuck, a real estate developer, and claimed he owed $30,000 in back taxes.

After his CPA went to bat for him, the tax debt was reduced to around $8,000. Chuck cut a check for that amount and mailed it to the IRS. A few weeks later, it was returned with a letter stating the case was closed and the matter dropped concerning his alleged liability.

Several years later, the IRS contacted Chuck again. They said he'd never have paid the original tax debt and now owed the IRS over $50,000 due to penalties and interest. This was based on the $30,000 original assessment, not on the subsequent correct assessment of $8,000. Chuck protested that he had mailed them a check to pay the debt several years earlier.

The IRS stated they had no record of ever receiving payment and that the case had never been closed. What happened as a result? Chuck had $30,000 seized from his bank account along with two plots of land, which were sold to pay off what the IRS claimed he owed, even though he'd already sent them.

Whether it is incompetence or disregard for law that sometimes leads federal and state tax agencies direct the lives of law-abiding citizens, the need for asset protection against such threats is indisputable. So, and it goes on and talks about how to plan against the IRS. The point is this, don't get complacent even about things like the IRS.

If you were to go back, one of the things that finally last year, the Operation Chokepoint was closed by the Department of Justice. It was Operation Chokepoint, if you're unfamiliar, was an initiative that was begun under President Obama in the United States, where back in 2013, various disfavored businesses started to find themselves in all kinds of problems, where all of a sudden their bank accounts were being closed and they're having trouble.

The first people who brought the subject, the story to public notice were porn actresses and payday lenders, who suddenly find themselves with their banks closed down, bank accounts closed down for no reason. And they hadn't had any overdrafts or anything else, but they're just, and they go and ask their banks, like, "Why are you closing our accounts?" And I said, "Well, you're high risk." And so of course, the Obama administration denied that there was anything involved, just like they did when the IRS was not issuing appropriate tax exemptions for right-wing political groups.

I said, "Oh, it was just nothing at all." Well, in hindsight, it was an organization, it was an action called Operation Chokepoint. And the government was bringing pressure on banks to diminish and stop doing business with various businesses that were disfavored. And this was, again, pornography, payday lending, fireworks, online gambling, home-based charities, as seen on TV, people who sell tobacco online or pharmaceuticals online, et cetera, firearms dealers, pawn shops, et cetera.

These were all kind of abused by this. And this is the same thing that is happening again and again today. And it's happening sometimes overtly and sometimes covertly. One of the major challenges that many organizations have is the law is being brought to bear upon banks. I won't go on and on against it.

So the point is, what do you do when you're involved in something that is entirely fine, entirely legal, but all of a sudden now your bank won't do business with you? Now, in this case, I'm getting a field of the IRS, but I consider the weaponization of this stuff to be a real problem with the IRS's whistleblowing program.

You want to have your life be nuts? Recognize that anybody can make a claim as a whistleblower to the IRS, an alleged tax evasion. And if tax evasion or fraud is found, then that whistleblower is entitled to receive a portion of the claim. So don't ignore things like the IRS because you think, "Well, I just pay my taxes, declare all my income, pay my taxes, everything is fine." That doesn't mean a thing in today's world.

Sorry, that was too strong. That's good. That's a good start, but it's not enough. When your ideological opponents who think that you shouldn't be a payday lender or think that you shouldn't sell guns or who think that you shouldn't be a porn actress or who think that you shouldn't be on the Southern Poverty Law Center hate group list, and now all of a sudden you're dropped by your credit card merchants, you're dropped by your bank accounts, you don't think that the IRS can't be involved in that.

We face a tough world where people who are your ideological enemies, wherever you are, feel that the best way that they can destroy you is instead of arguing with you on the field of ideas, they want to destroy you with the force of law. So I hope that I have put a little bit of reason for you.

I know I was strong in some of what I said. I hope that I've been appropriately modest to point out to you some risks. I tried to put a little bit of fear in you. I tried to use a little bit of sensationalism in this show because I want you to move off of zero onto go.

I want you to do something because as we'll see in subsequent shows, if you don't act today, you won't be properly protected when the circumstances arise that you have no concept of today. You can't buy life insurance when you're diagnosed with cancer. You got to buy life insurance when you're young and healthy and don't need it.

You can't buy disability income insurance when you fall off your roof. You got to buy disability income insurance when you're young and healthy and don't need it. You can't buy asset protection planning when a lawsuit is filed against you. You got to take the actions today to protect your assets when you are rich and stable and prudent and you can't foresee any risk because when three years from now, you go and start a company and just make a simple mistake of some kind, as in operate it without a protective entity or hire an employee who subsequently sues you for sexual harassment, even though you had no harassment, had no contact with them whatsoever, but because you rebuffed their advances, their sexual advances, they accuse you of sexual harassment, whatever the circumstances are, you've got to do it today.

Here's the good news. If you feel like I'm too strong, if you commit fraud, if you commit criminal wrongdoing, you will be found out and your asset protection planning can be unwound most of the time. So don't worry. If you are an evil person, there's really very little you can do.

But if you are an upright person, a good person, a moral person, just concerned about protecting the things that you've put together, stay tuned in this series. There's a lot you can do. Hope you have a great day. Ad for today at the end of today, new products will be coming out next week.

I'll share more announcements starting next week. I will be, put it this way, I will be much more stable in my production, in my location, et cetera, starting very soon. And you will see that reflected in the content. But for today, I would encourage, if you haven't yet purchased my credit card program, I would encourage you to go to radicalpersonalfinance.com/creditcards.

I'm sorry, credit card course, radicalpersonalfinance.com/creditcardcourse. And if you have a credit card, or if you think you'll ever have a credit card, then I would recommend to you that you buy my course. And here's why. I try to tease you, and some of the times I do these little blurbs, I try to tease you to go and check it out.

And I try to use things that are a little bit sensational to try to do it. But the whole point is not sensationalism. The point is for you to think in advance about the future that is unknowable to you today. So for example, if you think there could ever be a circumstance in which you would have credit card debt, as in, and my point is you have credit cards.

If you have credit cards, it would ever have credit cards. And there's a point at which you might have credit card debt no matter how committed you are to paying it off. There's a point at which you might have credit card debt. And there are lots of good circumstances under which we'd say that's a good thing to do.

You need to think today about getting in place the resources you would need in that circumstance. That's why you need my credit card course. You need to think today about the infrastructure that you would establish to protect yourself if you wound up in credit card debt and wound up battling with your credit card companies.

That's why you need my credit card course. Could go on and on. But this is the essence of financial planning. Forethought, imagining scenarios and thinking about what you can do today to protect yourself from a future unknowable risk. Go to radicalpersonalfinance.com/creditcardcourse. radicalpersonalfinance.com/creditcardcourse. Put it this way, it is the cheapest product I have yet sold you.

And it is probably the cheapest product I will ever sell you. It's 40 bucks, $39. And it is absolutely worth multiples of that. Go to radicalpersonalfinance.com/creditcardcourse. And I'll be back with you very soon. The LA Kings holiday pack is back. The perfect gift for the hockey fan in your life.

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