Client Case Studies
After surveying hundreds of investors and business owners who are members in our training and investment company www.CMREI.com, we found out that most people worry about protecting their assets.
The reason they do not take action to properly set up a structure is because they are tired of attorneys’ pitches that are confusing, overwhelming, expensive, cumbersome and downright complicated.
We then asked them to describe the features of the ideal asset protection structure they would like to have to protect their assets while still being active as investors, business owners and/or licensed professionals, and here is the list they came up with:
We want an Asset Protection Structure that is:
- Easy to understand
- Inexpensive to structure
- Easy to use and transact while structure is in place
- Easy to cancel or unwind
- Does not require anonymity (Transparency)
- One-year support by phone
- Easy to set up
- Easy to modify
- Inexpensive to maintain
- Easy to pass along to loved one
- Does not require transferring of assets
- Does not require on going attorneys fees
- Does not involve setting up offshore trusts
Case Study #1
A commercial real estate investor bought an apartment building (high liability) in California and placed a large down payment.
Following the professional advice of a licensed person, he did the following:
- He placed the property in an LLC (Assuming the bank accepted the LLC and gave him the loan based on his personal guarantee and the insurance company also accepted the LLC and issued a policy etc.)
- He understands that the insurance for each entity has exclusion, it may not even cover a large claim, it has a large deductible, and will not cover multiple claims. He is constantly worried about the on-going risk he has and realizes that he can lose everything in one devastating lawsuit almost overnight.
- He set up another entity (maybe even a C Corporation somewhere) to be the “management company” for the apartment building
- He is feeling more vulnerable every month as his net worth and equity increase due to his apartment building’s appreciation and debt reduction.
Solution:
- He learns of our Ultimate Asset Protection Structure via one of our videos online on our website and fills out the document online
- An Advisor calls him and within 15 minutes he understands fully the exact simple and powerful structure that would work for him and each of his assets.
- 72 hours thereafter, the apartment building owners have an LLC set up in WY along with all the legal entity documents necessary to create the Ultimate Structure.
- He follows the instructions and records a lien against his apartment building (To strip and protect his current and growing equity), and he records a UCC1 filing against his Management Company (To protect its receivables, which is the monthly rental income). All is done with economic substance to the benefit of his LLC in WY
- He has the Certificate of Ownership of the WY LLC, so he is able to conduct business as usual, without a hitch or any complication. He can get additional loans and subordinate the WY LLC lien position, he can sell the apartment building by handing the Certificate of Ownership to the Title company, and he can also add more liens to new assets as he wishes and so on.
The total cost for this set up in less than $6K all-inclusive (WY LLC’s Operating Agreement and state filing fees, the specific Promissory Note for the specific asset with the equity to be stripped and the individual Lien that complies with the specific state in which the asset is located).
The on-going yearly fee to maintain the one and only WY LLC is $450 to keep it in good standing with the registered agent and correct business filing etc. This is a fully structured Turnkey operation.
Case Study 2
A couple had their primary residence in Arizona and also two residential turnkey investment rental properties in their name in Ohio.
They met with a professional advisor and were told to the following:
- Remove your names from all of your properties and place each property in a separate LLC in the respective state where the property resides. (3 LLCs)
- Have all the LLC’s owned by a Nevada LLC that flows through to a C Corporation in Nevada that will be anonymous
- The C Corporation in NV that is anonymous will have the attorney as the nominee. The owner of the C Corporation in Nevada shall be a Land Trust that will have the attorney as the Trustee for client attorney privacy.
The couple was fascinated by the entangled web of stealth set up and structures involving:
- Four LLCs (one in AZ and two in OH owned by one in NV)
- One C Corporation in NV
- One Land Trust.
The cost was $1,500 per LLC entity due to “Special wording in the Operating Agreement” that is $6K plus the NC C Corporation that is anonymous $3K and finally a land Trust that the attorney threw in as a bonus free of charge.
After paying $9K the couple realized that to transact any business the process became very convoluted and the attorneys had to step in each time. So they subscribed to the attorneys. Monthly fee of $35/mo ($420/yr. Plus they had to commit to renewal fees on all 4 LLCs in the amount of $650 ea. And the NV Corp renewal and resident agent fees another $650 for a total of $650 x 5 = $3,250 per year plus the attorneys fees all an all close to $4K/yr
After paying $9K the couple realized that to transact any business the process became very convoluted and the attorneys had to step in each time. So they subscribed to the attorneys. Monthly fee of $35/mo ($420/yr. Plus they had to commit to renewal fees on all 4 LLCs in the amount of $650 ea. And the NV Corp renewal and resident agent fees another $650 for a total of $650 x 5 = $3,250 per year plus the attorneys fees all an all close to $4K/yr
They ran into a few problems:
- On their primary residence in AZ they were told by another advisor that when they sell it, they may not get the tax exclusion benefit IRC section 121 for a tax free gain on a primary residence up to $500K for a couple filing taxes jointly because the property now is in an LLC entity name.
- One of their investment properties in OH had a Loan and the bank considered the transfer to an LLCs a change of ownership and it triggered the due on sale clause. The bank demanded a full pay off or they would be in default. They tried to show proof and involved an attorney in OH to assist them for this matter.
- The other investment rental property in OH was free and clear, but when they transferred the ownership into an LLC, the county tax assessor’s office, reassessed the property and charged them a transfer tax, they also retained an attorney to fight that matter.
- They were told that anonymous Corporations do not sit well with Judges and there are precedents for Judges asking for the shareholders identity or they repossess the assets inside the corporation.
- They also realized that any judge has the legal right to get the full documents of a Trust or they can unravel it.
- They also found out that anyone suing them can go after the equity in any of the assets being sued.
They felt more confused and more vulnerable than ever before but it was too late to unwind the structure that cost them $9K to set up $4K to maintain and another $2K in legal fees to deal with as stated above.
Solution: (What they could have done)
- They could’ve kept all properties in their name
- They could’ve learned about our Ultimate Asset Protection Structure via one of our videos online on our website and filled out the document on line
- An Advisor would’ve called them within 15 minutes to explain the simple yet powerful structure
- The couple would’ve had the LLC set up in WY along with all the legal entity documents necessary to create the Ultimate Structure.
- They would’ve followed the instructions and recorded a lien against their home in AZ and two other liens one against each of their the two investment properties in OH (To strip and protect their current and growing equity). All is done with the proper legal reasons and economic substance to the benefit of their LLC in WY
- They would then have had the Certificate of Ownership of the WY LLC, so they could conduct business as usual, without a hitch or any complication. They could get after that any additional loans and subordinate the WY LLC lien position. They could sell any of their properties by handing the Certificate of Ownership to the Title company, and they could also add more liens to new assets as he wishes and so on.
- They would have no risk of not benefiting of the capital gains exclusion of their own home, no risk of tax assessor reassessing the property values, no risk of due on sale clause etc.
Finally if anyone tries to sue them, there would be no equity to go after!
The total cost for this set up in less than $6,200 all-inclusive (WY LLC’s Operating Agreement and state filing fees, the specific Promissory Note for the specific asset with the equity to be stripped and the individual Lien that complies with the specific state in which the asset is located).
The on-going yearly fee to maintain the one and only WY LLC is $450 to keep it in good standing with the registered agent and correct business filing etc.
(This is a fully structured Turnkey operation)
The on-going yearly fee to maintain the one and only WY LLC is $450 to keep it in good standing with the registered agent and correct business filing etc.
(This is a fully structured Turnkey operation)