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Listen to ModCast, March of Dimes research podcast, today. Today on Radical Personal Finance, it's live Q&A. Welcome to Radical Personal Finance, the 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, I am your host, and today on the show, we do live Q&A. You get to call me up, ask me any question, make any comment, we can talk about whatever you want to talk about. That's what a live Q&A show means. A couple of quick notes as we begin these shows, or as I begin today's show, these shows are entirely driven by you and what you would like to talk about, which means sometimes they work out really well, and sometimes they don't.

I do my best to keep the content moving along, I do my best to deal with the calls, but I just simply take them in the order that they come in. I don't pick and choose, I don't sell some people they can't call in, I just take them in the order that they come in.

A couple of notes, you will notice if you look in the notes on your podcast listening device, you will notice that I have put in to those notes the different questions and topics along with some time stamps. If there's a call that's just simply not interesting to you and you want to just skip forward, go ahead and feel free to do that.

It won't offend me one bit, but I do my very best to keep things concise and focused on the specific questions. I hope you're enjoying the variety of these Q&A calls. We begin with Dan in Alberta, Canada. Dan, welcome to the show. How can I serve you today? First, I just wanted to say thank you for providing such a diverse and unique set of advice and just being yourself without conforming to the mainstream.

I just really, really appreciate that. My pleasure. Thank you for the nice words. And I wanted to acknowledge that this summer I spent four months cycling across the US and Europe. As someone in my 20s, through the knowledge you've provided and understanding the value of money, I've been able to put away that time and money.

I think that's really unique and I think something that a lot of people don't have the skills to realize what's possible. So I remember you mentioned traveling in one of your shows and how really what you want to do is travel. You can hop on your bike and ride and that's what I did and it was really an experience.

What did you learn on your trip and how is it impacting your life now? Well, the first thing that jumps out is the value of companionship. When planning the trip, I was focused mostly on biking because I just really enjoy cycling and traveling. But yeah, about three weeks in, I kind of realized that I've been alone for three weeks on the road on my bike.

And yeah, really started to appreciate people a bit more. Yeah, that has always been my experience traveling alone as well. There seem to be certain personality types that thrive on it, but anytime I've traveled alone I've never enjoyed it as much as when I have been with people that I enjoyed being with.

So go ahead with your question for today, Dan. So to phrase it generally is how to give and share effectively. And a more specific example is when I do travel with friends, I work hard to save money to do this traveling and I can understand that my friends might not exactly be able to afford the same things or want to afford the same things that I can.

So if I'm asking a friend to join me to do something and finance is a barrier to them, how can I approach paying for them? Because for me, it's definitely worth my money to share that experience with them. However, if they can't afford it, how can I share with them without having a power imbalance where they feel like they owe me something or just sharing effectively, if that makes sense.

So your concern then is you're traveling with a friend and you want to have a peak experience, something that's going to cost money. And you feel, you know that you would love to have them go with you on this peak experience that's going to cost money, but you know it's not in their budget.

And so you're trying to figure out how to magnanimously or magnanimously, anyway, with magnanimity you're trying to figure out how to simply say, "Listen, this is a treat on me in an appropriate way." Is that your question? Yes. Yes. Well, in my mind, I think first of all, you choose your friends carefully and you seek to choose people who are not seeking to take advantage of you.

And if you are interacting with somebody who is taking advantage of you or who is trying to take advantage of you, then I think you simply speak directly to that and your actions should reflect that. Now if you're interacting with somebody who's a true friend in the situation that you're describing and you know that they're not simply a fair weather friend, somebody who's trying to take advantage of you just while things are good, then in my opinion, just make it clear to them and simply say, "This is a treat," and do it simply and easily.

I think the best way to do it is to just simply speak clearly about the subject and to say, "I would like to do this and I'd like to take you with me. I'd like to buy this ticket for you. Are you willing to come with me?" And make it clear to them.

There are no strings attached. I'm not trying to do anything. I just want to do this for you as an act of generosity so that we can enjoy this experience together. And if you just simply do that, then I think you will have... if you do it and you state it and you make it clear to them, you can avoid a lot of problems.

The key thing is for you to clarify it up front. I have... there are people, for example, there are people that in my life, when they invite me to do something, I'm very cautious to understand the full situation. So they might say, for example, "We'll go here and I'll pay for this." Meanwhile, I know that there are other associated expenses.

So I need to know, "Okay, if you're inviting me, are you inviting me and you're going to pay for the ticket, but then I'm going to pay for the meals, I'm going to pay for the lodging, et cetera." I need to know the full budget going in. So one thing you can do as the wealthier party is make it clear to them what they can expect to pay for.

When I invite people to do things, I like to take people shooting, for example. It's fun. I like to take all my liberal friends that don't own guns and don't ever shoot guns, I like to take them shooting. It's super fun. And what I try to do is I try to make it clear to them what the expenses are going to be, because somebody who's never gone shooting doesn't know what the expenses are going to be.

So if they're going to use my guns and I'm going to pay for the range fees, I do that, but then I give them a budget. If they're going to be paying for ammo and I'm going to do that and have them do it, I tell them, "Here's how much you can expect to pay for ammo or for targets," or if I'm going to provide those things, I make it clear.

And so when you're inviting somebody to do something that they're not sure about whether or not they're going to be able to do, and if that person is in a financial situation where they need to know and to budget those expenses, then you can really do a good job by just simply being explicit with all of the costs and what they could expect to pay for and not pay for.

That's on your end. So I think first, if you look for the friend and make sure that you're dealing with people who are – they would be your friends if you did nice things for them or not, and then number two, then you are clear with them, you can do a really good thing.

And I've had so many people in my life who have been economically generous with me when I didn't have money, and I so appreciate what those people have done. Now to the topic of a power imbalance. There's always a power imbalance in life. One of the things that really bothers me about a lot of kind of modern philosophical reasonings is people think that somehow you can get rid of power imbalances, that somehow you can eliminate any difference between people that would lead to a power imbalance.

And usually, unfortunately, the way that people try to eliminate a power imbalance is not usually by strengthening the person who is weaker, but often it's by tearing down the person who is stronger. I think power imbalances are entirely unavoidable. There will always be somebody who you have more money than, and there will always be somebody who has more money than you.

There will always be somebody who is bigger than you, and there will always be somebody who's smaller than you. There will always be somebody who's smarter than you and somebody who's dumber than you. There will always be somebody who's more attractive than you are and somebody who's less attractive than you are.

So we're all going to live in a life of imbalance. And so from that perspective, it's your job and your responsibility to cultivate the character and virtue not to impose coercion or manipulation on other people. So let me use a simple example. I am a physically large person. There are very few people who are physically larger than I am.

So of course there's an obvious power imbalance of me compared to other people who are different, different in physical size. But does that make my size somehow wrong or a bad thing? Only if it's not guided in an appropriate way. So my size can be a very good thing if I use it for virtuous and upright and righteous ends.

If I use my size to defend somebody who is smaller, to stand up to a bully, to stop some wrong that's happening, then that's a good thing. If I use my size for coercion against another person and I try to bully them or I try to physically force them or to intimidate them in some way, then now that's a bad thing because I'm expressing that coercion which individuals ought not to do.

And so I would just say that's your job. Just because you're richer than your friends doesn't mean automatically that you're going to exert a wrong power over them. It just means you have a choice and you want to be careful that you're not manipulating them. And so you're getting a benefit out of it.

You're getting your friends to accompany with you. Just make it clear to them, "I want to do this because I'm enjoying your company. I don't expect anything from you. This is a free and open-hearted gift." Those are my thoughts. >>Toby: Okay, excellent. Yeah, thank you. That does clear it up a lot.

I'll just add a little note of sometimes as a response, people have valued their own kind of financial independence in terms of like they don't feel comfortable accepting gifts all the time. Is that their right to hold on to that value? Or do you think there might be some room for me to kind of explain how you explained it, to kind of see things more from my perspective, that there is this power imbalance but that's not a problem?

>>Steven: I think it's their right. And so one of the things that I do think is good, especially if you're concerned about that, is it's very nice to allow somebody else to make a gesture indicating that they are not beholden to you, even if it's something of a token gesture.

So let's say that you take somebody out for a nice dinner and it's a $100 dinner. Even in that circumstance, when somebody is taking, sorry, you're taking somebody else out for a $100 dinner, very fancy, you know they wouldn't be able to avoid it. Sorry, they wouldn't be able to afford it in their budget.

It's nice if you let them pitch something in for the tip or if you give them an out that allows them to maintain their sense of dignity and say, "Well, I'll tell you what, let's go out for ice cream and you buy the ice cream after this expensive dinner." It usually will help somebody not to feel beholden to you in that way and I think that it's entirely fine to do.

Now usually, in my opinion, the way to do it is to give them a chance. So let's use dinner as an example. You're feeling flush, there's a really nice restaurant that you really love going to and you want to invite a good friend of yours along for company and for just for companionship.

And your friend is an honorable person who knows that you're being kind to them but they don't want to be beholden to you. So you invite them out for dinner and then they offer, naturally, to say, "Tell you what, let me leave the tip." And you say, "No, no, no, you don't need to do that." And they say, "Let me leave the tip." You should protest a couple of times because then they've at least made the gesture that, "Hey, let me leave the tip." They've satisfied that and if you overcome them by saying, "No, this is my treat," then they'll go ahead and just be quiet and appreciate the treat.

Now on the other hand, if they really press it three times, "No, let me leave the tip," then I think you should let them leave the tip because maybe they're solving that particular need. There are people in my life who have been deeply generous with me and I don't like feeling beholden to people financially.

And I appreciate the generosity, extraordinary, I very much do. But then what I will try to do is at times go ahead and without permission, I'll try to make a token gesture to simply show, "Listen, I appreciate your generosity, but I'm not a freeloader. I'm not a charity case.

I'm not asking for anything. And so I'll force the circumstances in some way that allow me to demonstrate that I'm not trying to take advantage of you." And so fighting over the tip, I think, is the normal thing. But trust yourself. The back and forth is a little silly sometimes, but if the person really insists, let them pay the tip or offer them, tell you what, you get the beers afterwards or you get the cigars or you get the ice cream or whatever the next thing is, give them a chance to show that they're not a freeloader.

Okay. Thank you very much. I really appreciate that advice. My pleasure. And congratulations on what you experienced with your traveling. I'll repeat it for anyone who wants to know. Traveling doesn't have to cost money. If you want to travel, walk out your front door, turn right and start walking.

You're traveling officially. You can walk across the country, you can bike across the country, you can walk around the world and you don't need a lot of money to do it. Now, of course, many people by traveling mean other things. So design what your ideal method of traveling is and go from there.

We move to Mark in Texas. Mark, welcome to the show. How can I serve you today, sir? Thank you, Joshua. I really appreciate you taking my question. Also, I highly appreciate all the great content you put out. I've definitely benefited from it. My question is concerning a 401k. I am a VP of a small company and I recently was setting up our new 401k for all of our employees.

And my question is regarding that. After setting it up, I had a good conversation with the owner of our company and he was okay with this idea. But I am more concerned about if there's any issues with it concerning the IRS or anything like that. It's my understanding that you can, a company can pay any employee that it wants to, no matter what type of work the employee is doing.

It's all based upon the company's decision. So in a scenario like that for a 401k system, if I am working for a company as a VP and if I had the company going forward, any yearly bonus or really it's more any yearly, excuse me, any change in my salary, any increase in my salary going forward, if I was to have the company put that in my wife's name, not my name directly going forward for the cause of having a greater 401k limit so I could put more money in a 401k, I wanted to understand if there's any issues that the company would have in the future by doing that.

My wife has done some work for the company. She is not a full-time employee for the company. So I wanted to know kind of your thoughts on that type of strategy. What kind of dollar amounts are we talking about here? So obviously my plan in the future would be able to fully maximize two 401k amounts.

So I guess it's 18.5 right now. So going forward, that would be my plan or my desire to see that happening. So give me a ballpark. What is your current compensation, your total compensation from the company that you are a VP of? Okay. So it's a small company. My total compensation would be right around $100,000.

And when your wife has done work for the company in the past without thinking about how her compensation would be structured, how much was she paid by the company? That was solely based on whatever project, it was per project that she was working on. So it could be anywhere around 500 to a thousand, just depending upon the contract per se.

And how many projects did she do in the past per year? Very limited basis. So a few thousand dollars then? Yeah, very limited. Now, of course that could change going forward, but I'm more interested so that way it's a consistent thing. Any increase in my salary goes straight to her.

And so that would help us to have the two 401k limits to utilize. Understood. Understood. Okay. So what I'm just trying to narrow focus in on is what things have been in the past, because there is, you have to fall in, in your work, you have to come in under virtually, basically reasonable compensation.

Now that word reasonable will depend on what's actually happening and who and how things are working. So my first obvious answer should be, this would be a good question for an accountant who is familiar with the local laws of your state, who works on your company's books, et cetera.

And I can help you think it through. And we have the benefit of my not being an accountant, not being supervised for that. So we can kind of say, is there a straightforward way to make this happen? So if you were to, if your wife were to work for the company more and be paid a higher salary, so the goal would be that she'd be able to earn at least $20,000.

So she could make basically a full contribution to the 401k. Are there services that she can actually provide to the company? Is there work that she can actually do to the company? Or is she just never going to show up? Yes, there is different projects that she can potentially work on.

And will your compensation go down? Is that the idea that your salary, your total compensation of $100,000 would go down because of trying to adjust some of the salary over to your wife? Or would hers be a different? No. No. No. My thought process was simply any increase, yearly increase would go over.

So mine would stay level and any increase would go towards her. Right. So let's start with what the law would say as best I understand it. There is a doctrine, and I'm not a competent enough accountant to perfectly identify it or to identify the court case. But there was a court case at least probably a century ago in which a high income earning professional, a high income earning, I don't remember exactly what case he was and I could look it up for you, or you could look it up.

But a high earning income professional was trying to get the money. He was basically saying, "Hey, all the income is coming in but giving it to his wife." I can't come up with the name of the court case, so I apologize. But in so doing, it went to the, I think it went to the US Supreme Court and it was ruled that no, the person who earns the income has to be the one who reports it and who pays the tax on it.

So if the question is this, the question is I'm working earning $100,000 per year, can the company "hire" my wife and pay her $30,000 a year and she doesn't show up to work, she never comes into the office, she never does any projects, she never writes an email, she doesn't have a corporate email account, et cetera, can they hire my wife and then she can make a 401k contribution?

The answer is no, they can't. And if you think about why, that's basically creating a non-defensible deduction for the company in terms of them deducting the employee wages. And if you could do that, if you could actually do that, it would be the basis of all kinds of tax fraud, at least under the way that the US tax code system works.

Because under that same circumstance, I could hire my wife and I could hire all of my children and I could hire my brother and my sister and my parents, I could hire everyone in my family, pay them all a $30,000 per year salary, I would create virtually an unlimited business deductions, like I could hire as many people in my family as I need to, now the business can deduct those wages and then with those incomes coming to them, yes, they would pay personal income taxes but at those rates it wouldn't be much.

So you can't do it if the "hire" has to be in air quotes. You can do it if they are legitimately hiring somebody. And so if your wife is actually going to work for the company and she's actually going to perform duties for the company and engage in products, then if she's actually going to work for the company, then what you say can work.

And so the key needs to be being able to say, "Hey, is this person actually working for the company?" Now in that context, then I think there is substantial room for the business owners to choose how much they pay her, to choose how they structure her compensation, to make those choices.

And so there's so much of a range of how much would be paid for different products and different services and the things that different people would do that the IRS doesn't have the ability to say, "One person has to - you have to pay this amount of money." So usually what you would do is for most - if you're hiring somebody who's a relative or a close friend, something like that, for most things it's good to get a market survey of what's happening in the local employment marketplace.

If I were going to hire my children to work for me in my business, then I would call up a temp agency and I would say, "How much would you charge me to send over a temporary worker to help me with filing?" If that's the work that my children are going to charge me for - that's the work that my children are going to do.

They're going to help me with filing my papers. And the temp agency would say, "We would charge you $15 an hour," or whatever the actual price is that they would say. Then I would take that estimate, I would get an estimate from them, and I would put that in my tax files and I would say, "This temp agency is giving me an estimate of charging me $15 per hour for them to send over an office worker to file my papers." So now I'm going to hire my child to work for me and they're going to file my papers and I'm going to pay them $15 an hour.

But I'm substantiating it based upon what the market rate is. And this is basically how most things work, is you want to substantiate the pay that somebody is receiving based upon the market rate. Now obviously, different markets will have different rates, and some market rates are easier to establish than others.

Let's say that your wife is hired to do public relations for the community, and one of her major jobs is to work as an Airsats lobbyist, where she goes around in the community and she goes to the morning breakfast meetings and markets your business. Well, how do you choose how much to pay somebody for that?

A lobbyist can make millions of dollars or very little money. And so those kinds of things, there's a lot more flexibility. So in summary, I would say this, yes, I think that that arrangement can work, and I think that you could work it out with your employer for them to hire your wife and to pay her substantial compensation so that she can participate in the 401(k).

And I think that can work out for you and for her and for your employer. What I would do is make sure that all of the dots are, I's are dotted and the T's are crossed, where you actually, she has an email address for the company, she works for the company, she shows up on certain days or she makes business correspondence, she files some form of report to the employer about what she's doing.

If she's not, if her job and her function is not to come into the office, she needs to file activity reports, she needs to send in some form to actually substantiate that, yes, she is a legitimate, bona fide employee of the company. Now within that, I think you have enough creative license to make it work for you, for her, and for the company, but you can't just do it without those actual facts being there.

Is that clear enough, Mark? Yes, that's perfect. I really appreciate that because that gives me some clarity on to make sure it's structured properly. And so that's really helpful, and I do fully understand. Good, good. So as long as you're following basically the spirit of the law, then I think you will be in good shape.

And within that, I think you have enough license, just as any business has with their employees, to make things work for you. We go now to John in Pennsylvania. John, welcome to the show. How can I serve you today? John, are you there? Sorry about that. Yep, John, you're back.

Okay, go ahead, John. Hi, Joshua. Thanks for taking the call. Yeah, I have two questions if you have time for them. First one is, after hearing the asset protection series you just went through, I kind of had some new concerns about some money that I had in various accounts.

I had about $450,000, some of it, a good portion of that, about $300,000 in brokerage accounts and about $150,000 in other bank accounts. And I may soon be coming into another $100,000 that will probably go into one of those brokerage accounts or bank accounts. And I have this money just kind of not doing a whole lot.

The brokerage accounts are, of course, invested, but the other ones are just, I guess, they're accessible. It's accessible money is the first reason I have it there. It's money I could live off of for a number of years if I lost my job or whatever or just chose to take off for a number of years.

And especially the money in the non-invested accounts, they kind of give me like a mental hedge against being more aggressive in my other investments. So they serve some purposes, but now I'm looking at them in another light, which is they're very exposed as far as not being protected assets.

And I was just wondering if you had some other ideas on if I have all my other things, the easy things like the IRAs and the 401(k)s correctly listed with their beneficiaries and all the other things you had described. For money that's not in protected accounts, what kind of things would you suggest?

Or is asset protection kind of not something that's so far worth it that you want to kind of make the tail wag the dog? You know what I mean? All right. Well, you'll have to make that judgment. Certainly, asset protection strategies will cost you money, and that's the problem with the analysis.

I don't know the answer in terms of when you're saying, "How do I judge my risk?" For somebody who's not in a high-profile occupation, for somebody who's not out and in the front-facing function of some kind, for somebody who's not a politician or a business owner or a doctor or some kind of thing where there's higher risks, for somebody who doesn't have a high-risk lifestyle, they don't own an aggressive, vicious dog, or they don't drive their car too fast, then is the actual risk all that high?

Probably not, but how do you know? I've seen enough evidence that people are targeted for having deep pockets, and I've seen enough evidence of real cases that are brought against people that I'm not confident like I would like to be about that question. So I think it is worth considering.

But how much is it worth considering? That's the question. How much money should you pay? If you have half a million dollars that's exposed, how much should you pay? Would you pay $5,000 to protect half a million dollars? I think most of us would. That seems really reasonable, because for somebody who has a half a million dollars, $5,000 is not all that much.

Would you pay $50,000 to protect $500,000? That's hard to say. You would have to say, "Well, I've got some substantial risk that I'm concerned about." And where those numbers line up are very different for each person. So I don't know how to answer that question. What I do know is if you are aware of the strategies that exist for you, and if you are aware of the things that you can do, then you can think about it, and you can take the actions that will help you in that context.

So let's talk just very briefly. I'll just give you a couple of ideas, because I will do more shows on asset protection and some of the more advanced strategies, but that starts to get where I get out of my area of expertise, and I don't want to make any terminal errors there in my advice.

And so usually I'm going to refer you to somebody who is an attorney in your state. But I would say this. When you look at your money and you think about what do you actually want to do with the money, then you can think about how to protect it.

So in many of the things that we have talked about, the entities and such, you can use those entities and they'll benefit you no matter what. The ones that I like to talk about are what we've talked about so far on the show. I haven't talked about college accounts, but in your state, college accounts may be protected.

And so some parents can just move the money into a college account. I really like, for some of those safer dollars, I really think life insurance is a good, useful scenario. So you go through all of those different accounts and you kind of cover those. Now then you go back and say, "Well, I've still got the money." So what do you do now?

Well, I think this is where you do definitely move into an entity, either a business entity, such as a limited liability company, or a family limited partnership, limited liability partnership, whatever you're going to establish, or you move into a trust. And I think that you can design those things in a way that is inexpensive enough to work for you.

Example, let's say that you enjoy trading your money. Well, in that situation, you can establish an LLC. It's a flow-through entity, so we're not going to make any tax changes here, but you can establish an LLC that allows you to trade your money, but yet the assets become, you make a contribution to that LLC and the assets become the property of the LLC.

And so now, instead of your brokerage account being held in your personal name, now it's a business that you are a director of, and you can easily set that up with substantial protection. I think at this stage of your wealth, you certainly should seriously consider a trust. The challenge here will be to figure out how to get a trust that is cost-effective.

And so you basically have a couple ways that you can do this. Usually in the asset protection world, you'll hear people talk about a domestic asset protection trust and/or an offshore asset protection trust. And so when you look at these options, if you set up a domestic asset protection trust, there are, I think, something like 13 states that do have legislation that allows a self-settled trust to have asset protection.

So a self-settled trust is a trust that you contribute assets to and you're a beneficiary of. So a self-settled trust is not a separate entity for tax purposes. The taxes all flow through, but usually that type of trust doesn't give you any kind of asset protection planning. And so in that case, you have to be in one of those states.

And the downsides of domestic asset protection trust seems to be there's a minimum amount of settled law, of case law that's been established, and you have to be in one of the states that recognizes that a self-settled trust has asset protection features to it. You can go offshore, but the challenge with going offshore is frequently that you will pay substantially higher fees, and those may not be necessary to you, especially if you don't have a current threat that has materialized.

An offshore trust, the biggest benefit of an offshore trust is you'd establish the persons in the trust to be in an entity that doesn't recognize US law. So the most famous jurisdiction here is a trust that's based in the Cook Islands. The Cook Islands is big in the trust business.

And so if you hire a trustee for your trust that's based in the Cook Islands, if somebody wants to sue that trust, then they have to actually go to the Cook Islands, they have to hire a Cook Islands attorney, their lawsuit has to be admissible under the law of the Cook Islands, they have to reach a much higher level of proof in their case.

So for example, in civil cases, one of the challenges for asset protection is in order to win a civil case, somebody just simply has to meet the preponderance of evidence standard, basically a 51% chance that the person is guilty, not the criminal standard in the United States of beyond a reasonable doubt.

But you can move your trust assets into a jurisdiction that requires the proof of a case beyond a reasonable doubt. So you start to stack up all of these features of an offshore trust, and you have major protection, major legal protection for your trust. The downside is all that stuff costs money.

So I think if you're going to have an offshore trust, what seems to make the most sense to me is establish a domestic trust that is portable. So you establish a domestic trust, and then you put into your trust documents a design that says if the beneficiary of the trust, which is you, if you are facing a significant legal threat, then this trust jurisdiction is going to be changed from the United States to an offshore jurisdiction.

And so you can maintain a trust with lower costs inside the United States, and then when a legal threat materializes, at that point in time, your trust moves offshore, so you get the benefits of the offshore trust. And by doing it in that way and funding the trust in advance, you don't run afoul of the fraudulent transfers or fraudulent conversion legislation, so it keeps your assets safe, but it keeps your costs down.

And that's the real challenge. And so when you start to put these benefits of an offshore trust together, in my opinion, that really is the best solution. There really is an ultimate solution that's really good for most people, but you've got to manage the cost. Now you'll have to look into it, and you have to assess your actual risk, you have to assess what you can do, and you'll need to get competent legal advice from an actual attorney who can set those things up for you.

But that's my best answer for you. And by the way, there are other things that you can do in the United States. So for example, one of the concepts that intrigues me is if you're in a stable marriage relationship and you have a good relationship with your wife, and you're not concerned about the potential of divorce especially, there's a trust that you can set up called a Section 541 Special Power of Appointment Trust that basically is a domestic trust with low costs in it, and that can work really well inside the United States.

So there are other options, but you've got to go and consult an attorney. Let me stop going on and just stop with that. Is that helpful at all? Yeah, that's very helpful. I appreciate it. I was kind of looking more towards things like trusts, or I don't think umbrella insurance is the same kind of asset protection that we talked about, but these trusts and the things you had mentioned about life insurance was what I was really curious about, but it's good to get the overview of what those things are.

And I don't, at this point in my life, I don't engage in a whole lot of risky behavior, and the older I get, the more so that is. And I also keep a pretty low profile in a lot of regards, and I was more concerned about an unfortunate bad car accident or something that you just can't control that's out of the blue that puts a lot of stuff at risk.

I think in a very backup situation where, obviously, if I hurt someone, I'd want to settle that and take care of that, but in a backup situation, you had also mentioned just going to buy property in Florida as a last minute thing, which is kind of just tumbling in the back of my head.

But yeah, nothing on the horizon now. I'm just kind of a worrywart about this stuff. Right, right. Yeah. And it's hard to not ... I have no idea how to solve that. I'm an extremist by nature in almost everything in my life, and so I always go to the hardcore extreme.

I want the ultimate protection, but I always do try to qualify that. The ultimate protection is usually inconvenient and expensive, and you have to say, "What's this worth at this phase of my life?" I want to make one comment on insurance. Don't think that you don't need insurance. An umbrella liability insurance policy is some of the absolute cheapest protection you can buy.

So I haven't gotten to talking about insurance. I tried to just start with kind of low-hanging fruit of exemptions in the series, but definitely insurance has a place. And insurance is usually your very best first form of defense, making sure that you pay for proper insurance. Your cars, your liability coverage should be high.

Your house, your liability coverage should be high. You should have an umbrella liability policy that coordinates with policy limits that are on your car insurance and your home insurance, and that umbrella liability insurance will be high, should be high. That is your absolute cheapest form of defense. It'll be much cheaper for you to do that than to go and establish various asset protection trusts.

So if you haven't done those, do those, and I'll cover insurance in the future. But don't think that you don't need insurance, because that is a lot cheaper than setting up new trusts. One more comment. The basic function of trusts and other forms of entities is to do your best to unbundle the rights of property.

So one of the things that lawyers deal with when they're in law school is they try to figure out what is property? How do you actually define property? And there are, of course, different definitions. But one of the definitions that I hear asset protection attorneys write about and talk about is that you can think of property as a bundle of rights.

It's certain rights. And so what you can do, what you try to do, is to unbundle the rights. Typically we hold all the rights ourselves. But if you can unbundle the rights of property, you can keep the rights that give you the beneficial use and enjoyment of property while moving the ownership rights over into a protected entity.

So simple example. Your car. What rights of property do you have in your car? Well, the two biggest, most important ones would be right of ownership, the right to sell it to somebody, to own it, and then the right to drive it. But you don't have to hold both of those things personally.

You can move your car, can be owned by a business that you own, and then you can just simply have the right to drive it. It doesn't change anything about your personal rights in the property because a business owns it. So a lot of asset protection planning strategies, that's the basis of what you're doing.

In my example about trading, let's say that you're actively involved in stock trading. Well, you can establish a trading company that allows you to continue having ownership of those assets, sorry, control over those assets. You can choose the investment decisions that are made in that trading entity. But now the ownership of those assets has been moved to a company.

And so a claim against you will also then have to go to the assets of that LLC. And in the assets of that LLC, if you set things up properly, you don't have to make distributions. You can hold the distributions inside the entity. So if you think about what you're trying to protect, you can work it out, but you need to get legal counsel on that, competent legal counsel.

John, you said you had two questions. Go quickly to the second one, please. Yeah, no, I appreciate that. I'm looking forward to talking about insurance for the asset protection because that actually does dovetail into my next question, which is you say that insurance is some of the cheapest protection you can get, which is both on insurance I was thinking about and also something I've been sleeping on for years and I really ought to do it.

And I was just kind of hoping to get reconvinced that a simple term life insurance is very cheap protection because even though it's very cheap, I don't see a whole lot of need for it considering my wife and I, if something was to happen to one or the other of us, we could still make do, although it would be more stressful.

We just haven't seen the value in paying $1,000 or $2,000 a year for term life insurance, even though I'm told by everybody and I think even by you in the past that it really is cheap insurance and I haven't been able to convince myself to pull the trigger on it.

Well, I may not be able to convince you either. I'm sure that I'm biased just because of my personal experience as an insurance agent. And one of the things I've observed is people who have a certain experience, it changes their perspective and it's hard to, you know, physicians sometimes start to manifest all the symptoms of illness that their patients have, but it's not because they actually had the illness, it's because they're around all the time and they thought they had the illness.

So life insurance agents I'm sure have a predilection to say, "Well, you're going to die so you should have life insurance," because we file death claims where many people don't do that. Let me just give you one simple point on something like life insurance and how it can bring in to the world of asset protection, even just term insurance where you're not building up cash values, you're not trying to protect money that you have inside of a policy for your benefit, just term insurance.

You may not need it. All right, there's a good chance that you might not need it. If you have enough assets that you're financially independent, then you are effectively self-insured. But what you should consider is you should ask yourself the question, "Are there risks that I might face that could wipe out my assets before I die?" And I would say two big risks here are unpaid for health costs, actually three big risks.

Number one is unpaid healthcare costs. Number two is unpaid long-term care costs. And number three would be unpaid personal living expenses during extensive disability due to sickness. And when I look at something like term life insurance, I always think about how well that can protect my family against risks like those.

Now, if you have the world's best health insurance that's not connected to your job or that would be portable in the case of your job, and if you have enough money to be able to pay for that health insurance under the continuing coverage provisions of the policy if you were separated from your employment, then maybe all of your health insurance, your healthcare costs would be paid for.

But most of us don't have a Cadillac policy like that, or most of us don't have enough money that we could actually pick up those premiums if we were separated from employment due to extended illness. And so I think it's at least reasonable to say it's possible that we might have significant healthcare costs from an extended illness that are not paid for by health insurance.

Number two, long-term care. Most people don't have long-term care insurance and/or they don't have unlimited long-term care insurance policies. And so if something happened where somebody had early onset Alzheimer's, early onset dementia, some kind of ongoing chronic illness that led to their having substantial health costs, then in that situation they would have additional expenses that would drain the family assets.

And then the third thing would be living expenses. If you add those first two together and then somebody faces something like an extended illness, it's not unreasonable to think that they would go through money pretty quickly, paying for living expenses and healthcare costs due to hospital care or long-term care.

Now is that a catastrophic situation? Guaranteed. No, it's not. It's absolutely not a catastrophic situation, guaranteed. Somebody who's a sound and wise financial manager would find ways in that situation to do their very best. And they would probably be able to leave their spouse with assets still that their spouse would be okay in the case of their death.

But if I were in that situation, would I feel really good about having $5 million of term life insurance in force? That I knew that even if we spent every dollar on my care, every dollar on my hospital expenses, and if we took money from savings and we traveled the world to kick all our buckets off our bucket list before I kicked the bucket, would I feel really good knowing that my wife would be entitled to receive that $5 million of life insurance payout upon my death, which would completely replenish my estate?

And would I feel really good about knowing that that life insurance payout would be not subject to the attachment of my estate's creditors? So that even if I racked up a million dollars of healthcare, of hospital bills, even if we racked up all kinds of credit card debt and we fell behind on our mortgage, et cetera, that $5 million would be there to completely reset my wife's financial situation.

And I could establish that $5 million and keep it completely free of claims of any creditors. And I could do that for a measly couple thousand bucks a year if I need $5 million of coverage. In my mind, that's the kind of risk reward payoff where you look at something like term life insurance and say, "Man, that's a powerful tool." Now do you need it?

I don't know. But I got to say, that's a powerful tool and it's a lot cheaper than maintaining a trust in the Cook Islands. Yeah, no, that's kind of exactly the kind of thing I was hoping to get a perspective on. I really appreciate it. It's a good defense of it and good pitch for it.

So thank you. I appreciate it. My pleasure. All right, got two more callers on the line. We go now to back to Texas. Texas, welcome to the call. How can I serve you today? Hi, Joshua. Good morning, Joshua. Hi, Joshua. Good morning. Go ahead. Hi, yes. I'm just listening to your recent call in about Roth IRAs.

I have a question. My wife and I have been working to get out of debt, kind of following the Ramsey plan. And we'll be receiving a large sum of money, not large, but a lot of money in the next month to pay off our debt. And so my next step is to build an emergency fund.

Kind of my target goal was $10,000, $12,000, three to four months of expenses. My question is, though, I don't currently contribute to a Roth IRA. So my question is, can I wait until the April filing deadline to establish a Roth IRA for 2018 and should I do that considering a limited amount of savings at this time?

Yes. So if you're going to continue, which I'm not trying to dissuade you from, but if you're going to stay focused on paying off your debt, stay focused on your debt snowball, keep that same focus there for yourself of getting out of debt. So get out of debt. Now with additional money, if your major focus is, or your major goal and hope is to have that money available as an emergency fund, I think making a Roth IRA contribution is a great place for that money.

But what I would do is, to be clear, I would open a Roth IRA account. You can choose whatever custodian you want, but of course, choose a low cost and convenient custodian that you want to work with. Make the contribution to the Roth IRA, but don't invest the money.

Keep it in a cash account, a money market account, some kind of cash or cash equivalent account so that it is not subject to market risk. And you're living in Texas, right? Yes, sir. Okay. So in Texas, you get the benefits of state protection for Roth IRA assets, also IRA assets from an asset protection standpoint.

And yes, you can make your 2018 Roth IRA contributions anytime up until the tax filing deadline for your 2018 taxes, which is April 15th or thereabouts. So yes, what I would do is I would open a Roth IRA account for one for you and one for your wife if you don't have one open currently.

I would make the contribution to that account and then earmark the contribution as being for your 2018 contribution in hopes that you can, by the end of the calendar year 2019 or by the end of when you file your 2019 taxes, you can save additional money for your 2019 contributions and just keep the money in cash as your emergency fund.

And then if you need the money out, you just simply take a distribution back out. There's no tax consequences, but work really hard, of course, not to do that. Work really hard, just keep it there as an emergency fund. Okay. And then once I get into a better cash position, I can move that money in the Roth IRA from a money market account to equities that I want to invest in after I have a better cash position?

That's right. So whenever you reach the point at which you have enough cash to feel like you have a fully funded emergency fund. So let's say you reach six months of expenses. Once you have six months of expenses in cash, and that cash could be in your Roth IRA, or it could be in a savings account, or it could be in physical currency that you keep under your pillow, or it could be in some other place.

Once you reach the point that you have your six months of expenses, then go ahead and start earmarking your investments and investing your money, investing the money that's beyond that, move it from the cash account over into an investment account. And you can do that within your Roth IRA.

Okay, great. Right. And so in your calculations, you're obviously focusing primarily on having stability of the money, and you're thinking a little bit about the asset protection. But if you do start to develop cash in other sources, then you do want to make sure, since cash is lightly taxed, you only pay tax on whatever interest you're receiving, then you do want to make sure that you do your investing, your highest growth investing in the most tax favorable account, which will be most likely your Roth IRA.

So don't go and open a brokerage account, keep all your cash in the Roth IRA. You want to make sure your highest growth investments are in your best tax advantaged account. But on the way there, I see no reason for you not to use the Roth IRA, because if you don't use it by the tax filing deadline, you'll never be able to get those 2018 contributions back.

Go now to, let's see, what is it? The Evergreen State, State of Washington. That's your state motto, right? That is correct. How are you, Joshua? This is Ben. Welcome, Ben. Welcome to the show. How can I serve you today, sir? Thank you. Hey, I've been doing pretty well with my finances this year.

I've got my 401k maxed out, and I have a little bit of cash left over. Think about buying myself a nice vehicle. I had budgeted between $30,000 and $35,000, but a couple of days ago, you mentioned that instead of someone buying a new vehicle, why don't they put that towards some sort of investment and then have that monthly profit go toward paying for something else instead of buying a new vehicle outright with no debt.

So what I was wondering, I need to get my creative juices flowing, and what type of investment could that money go into? Any type of investment that would provide you... So would you, if you had an investment of $35,000 value that was paying you out money, would you be comfortable with taking out a car loan or some version of that and making a monthly payment on it?

No. Okay. So that's the only way that the idea that I said really works, because otherwise, you'll need to generate enough investments that you have enough money that you could just save for two or three months and then go back and buy the car that you're trying to buy.

In my little example, let's pretend this. In your local real estate market, are there condos or something like that that you could buy in the vicinity of $35,000 or mobile homes or something like that? Mobile homes, yes. Condos, that'd be a decent down payment, but I would still have to get a mortgage after that.

Right. So let's use real estate. I like to use real estate because it's more intuitive for people than dealing with dividends on stocks or capital gains on stocks, just because real estate is straightforward. We understand it more than we do stocks. But if you could go and you could buy a couple of mobile homes for $35,000, and if those mobile homes were rented out, you paid cash for them, you would look at your cashflow from those mobile homes, your rents, and of course, you need to look at your net rents after you pay your lot fees and whatever you're paying for your expenses.

But you would look at those net rents from your mobile homes and you would say, "Oh, look, I have here, I don't know what number to use, but I have $350 a month of net rents from my mobile homes that I own." Let's say I could buy two mobile homes, rent them out for 500 bucks a month, $1,000 of gross rents coming in, and then by the time I pay my lot fees, rent service, any debt, if you did this with a condo and you had a mortgage, by the time you service any debt, the goal is say, "Can I create profit of $300 or $350 a month?" Then with that $350 a month profit, you go buy a car, you finance all of the $35,000 of the car, and your monthly payment on that car is $350 per month.

So fast forward, let's say it's a 60-month loan on the car. You use a long-term loan because you're lining it up with your cashflow, so you finance it on a 60-month loan. Well, at the end of the 60-month loan now, if all goes according to plan, then you now have a paid-for car and you have mobile homes that are still paying you $350 a month net profit or whatever your real estate investment is.

That's the concept. And so in an economy like the United States of America, where there is abundant access to debt capital, which is very different than many places in the world, where you can find all kinds of people just falling all over themselves to try to lend you money, you can set up something like that situation.

And if all goes according to plan, it should work out really well because you buy an investment asset that gives you cashflow, and then instead of just putting that cashflow in the bank, you can then use that cashflow to buy the consumption item. Does that make sense as far as the concept?

Yep, yeah, as far as the concept, that makes sense and gives me a little bit more of an idea of how creatively to go about this. I enjoy right now having my car paid off, no car loan, but that wouldn't really matter if I have that money coming in to pay off that long-term loan like you described.

Right. So I wanted you to just recognize the key words I said were, "If all goes according to plan." And the reality is many times, the best laid plans of mice and men, blah, blah, blah. So things can go not according to plan. And so here's where you should look at your affairs and try to make sure that you're being careful, prudent, conservative, doing your very best to make sure that you'll be in good shape to not, so that your plans don't all go crazy.

So first thing is you should have money, you should have additional savings on hand. Do you currently have more than $35,000 of saved money? Yes. Good. So if you additionally have an emergency fund or additional savings, then it's not imprudent for you to either spend the $35,000 on a car, nor is it imprudent for you to go and buy a $35,000 investment asset.

Because if you over here in your savings account have another $20,000, then if your tenants don't pay or they burn the mobile home down, or you have to evict them, or tax rates are raised, whatever, all the stuff goes wrong with your investment plan, then you still have enough money where you should have enough time to make your payments on the car without things going wrong, and you should still be able to do that.

Then of course, you would look at your financing and you say, "How can I finance this car in the lowest cost, lowest risk way?" So that might be going down to Toyota Financing Corporation, or it might be buying the car with a cash advance on a credit card. You look at that and you calculate the options, and the goal is to say, "How can I have the lowest cost, lowest risk loan?" And then you have to figure out, "What can I actually invest in?

What would I actually buy?" And so I don't know if mobile homes in your area are a good investment or not, but you might be better served by buying a $100,000 condo, putting down a $35,000 down payment on that $100,000 condo, and you might still, if all goes according to plan, net enough from that condo to pay your car payment.

But the basic goal is to say, "How can I get my investments to pay for my consumption items rather than just spending all my money on my consumption items?" Okay. That put it very clearly. Thank you. Thanks for explaining that. If you will think like that, then as time goes on, your wealth can continue to grow and your consumption can continue to grow.

Now you may or may not finance things. You may or may not use debt. You may or may not do that. That's up to you. But if you will think that way and always try to find your investments before your consumption items and then make your investments pay for your consumption items, then you have a lifetime of consumption items available to you.

Because once you own that asset, pretend you can buy a condo, and that condo will pay you, let me wrap up the numbers. Let's say once you own a $75,000 paid-for condo, that condo should pay you enough to pay a car payment every single month for the rest of your life.

And so you could lease a car every month for the rest of your life, always be driving a brand new car, trading it in every two or three years for a new lease payment. And basically, your cars are virtually free in a sense because they're being paid for by your investment assets.

That's the basic process of wealth building. That's what we do. And so you have to analyze your situation, look at your income opportunities, look at your investment opportunities, look at your business opportunities. But before you go and buy a toy, look to see, is there some way that I can use that toy to get the best deal?

And then, of course, finally, I'll say this. Anytime you buy a toy or buy a consumption item, look, of course, to buy it in the most efficient way possible, get the best deal, get the lowest price, get the best financing terms, whatever you're going to do. But then also look to say, can I make this thing make more money for me?

Can I make this thing do more for me? So maybe that means with your new car, you say, well, I don't have enough money. For some people, I don't have enough money to buy a condo, but I'm going to buy a new car or another car. But let me make sure I'm going to go and drive this car two weekends a month for a ride share service and make enough to pay my car payment.

Many people could do that. And it's probably the best use of those kinds of companies, like driving for Uber, Lyft, et cetera. They don't work well as full-time occupations. The pay is too low. But for somebody who wants to just simply make a car payment, they can do that.

Or look at it and say, if I'm going to buy this car, how can I buy this car in a business that I've created that would allow me to depreciate it or to expense my miles in a bigger way? So to look at every way that you can to try to maximize the value of it, and when you start putting all those things together, then again, you can have a lifetime of increasing wealth and decreasing and in good solid consumption over time.

That's it for today's show. If you would like to join for another Q&A show, keep an eye on the schedule that I have been publishing. I hope you'll join me in the future. And in closing, I would say, let me again, mark it to you my credit card course, radicalpersonalfinance.com/creditcardcourse.

One of the things that the way that this applies to the call that we've just heard is how do you finance the car? And one of the benefits of a credit card is you have a fairly low payment in terms as compared to the actual value of the debt.

And so your monthly payment on a credit card balance is 1% of, usually it's 1% of the total value of the loan plus the previous month's interest payment. And so sometimes you can use a credit card payment and get lower payments on debt, which can help you if you are in a situation where everything's not going well.

So there are numbers that would be too big. I don't know what Ben's income is. I don't know what those scenarios are, but I wouldn't be scared to buy a car using credit cards because it gives me more wiggle room sometimes than a car payment does. It'll be easier for me to adjust, pay less on my credit card payment sometimes than it would be on a car payment.

So that's the kind of application that you could use with the concepts that I've talked about in the credit card course. Or additionally, you could use credit cards as a form of backup financing so you have more wiggle room if your tenant did move out and if they burned down your mobile home in those situations.

If you ever take out financing, you always want to think about how to make sure that if everything goes wrong, the loss is not catastrophic. If everything goes wrong with your investment, if everything goes wrong with your car, how do I make sure that I have plenty of wiggle room so I can solve those problems and have room to work my way back?

And part of that involves making sure that if you borrow money, you borrow it in the most intelligent way. So understand how credit cards work. If you'd like to sign up for my course, go to radicalpersonalfinance.com/creditcardcourse, radicalpersonalfinance.com/creditcardcourse and sign up there. Thank you for listening. 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.

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