My Realty Gains
Kevin L. Day is one of the leading estate planning and international asset protection planning attorneys in the United States.
Mr Day is a regular speaker to professional and business groups on issues affecting business owners and high-net-worth individuals. His expertise in asset protection and estate planning brings him to be a noted speaker of continuing education conferences for legal professionals, as well as accounting professionals. He is a well-regarded speaker at business-tax planning and investment conferences in the United States, Canada, Mexico, the United Kingdom and the Caribbean.
Prashant Kumar, CCIM – People invest in stocks and bonds because that’s what they have been told and that’s what their friends do. They make money, and most of them end up losing money also. The purpose is to educate them and teach them how to make good investment decisions. Now that you are here, I would like to know your good thoughts.
Mr Kevin Day – Yes, my law firm, and we have about 28 people and growing, and we work in the area of trust in Estates. My department is about lawsuit protection and privacy. And I like to be an educator. I don’t like to be a salesman about my services. What I want to do is educate them about what’s out there and what they should be concerned with.
The less exciting part of Investing is it’s much more fun to find the next project and find a better return that has lower risk. My job is to say you also need to pay attention to not just making the money but keeping the money. I think that I’m a good candidate for not only my expertise but I’ve written a few books on Offshore Asset Protection Trust, Domestic Asset Protection, and Trust on Privacy. I’m an investor myself, and your listeners in the high-tech field are professionals just like myself, and we make good money.
I happen to also own my own business. My wife is a W2 executive, and all of a sudden we had more money than we needed to live on.
And what do you do with that?
Disposable income. I saw with all of my clients, whether they were business owners or high-paid employees, the ones that had incredible cash flow and wealth were invested in Real Estate. I had regular mutual funds and I’m ticking along, but then all of a sudden, after all, our creature comforts were taken care of, we started to because we’re savers, we ended up having a good amount of money and we’ve got to do Real Estate. We initially did single-family residences.
We had to have a manager because I work not only in my job, but running a law firm. And my wife, head of a charity, had her hands full. But we enjoyed finding the real property. We enjoyed working with the subcontractors to put new granite in the kitchen and things like that. And we found a good manager because we didn’t like managing it. But after we got seven or eight homes, we just realized we couldn’t spend that much time. And so the answer was to invest in other people’s projects. And we’re glad that we have our homes. They’re good cash flow. But it just got to the point where working with Syndicators like yourself was the right answer.
Prashant Kumar, CCIM – Awesome.
Prashant Kumar, CCIM – What are the legal things in Multifamily? We all know the benefits of Passive Investing, so let’s not go too much into detail about that. I would like to hear the legal side of what you can share. What should they look for? What are the lookout things?
Mr Kevin – The biggest thing is for people to know about the US Market. There’s a wonderful opportunity here, but we also have 94% of the world’s lawsuits. Everybody will go to either a corporate lawyer, Real Estate lawyer or an Estate Planning lawyer and say I want lawsuit protection. And they’ll say, Oh, how many assets do you have? You need seven LLCs, period. That’s the answer.
There is wisdom in putting eggs in different baskets, but the presumption with that being the most you can do presumes that you’ll lose the eggs in a particular basket. And we have many different strategies, but a very important one that I think relates to Real Estate Investors is to create what we call a privacy company, but effectively it’s your family’s private bank. What we do is put your wealth into whatever you call it. Let’s call it Golden Mountain Lending or Golden Mountain Funding. And then that not yourself, not your person, but that company puts the investment into the various investments. And we do it in a way that allows us to put liens against your investment. So not a lien to the bank of America, a lien to your own family’s bank, in this case, Golden Mountain Funding. And what that tells a litigator, if litigation occurs, is that there’s a senior creditor. If I have a judgment against you and bank of America is on first, I can’t go. I can go, but they’re going to tell me to take a hike.
Hey Bank of America, take your lien off, because I just got this judgment and I want to foreclose on the property. They’re going to say, no, we get every dime. We’re a secured creditor. You’re behind us. And in our legal system, it’s the first time the public record is first in the legal right to every penny. If you’re a secured creditor. We’ve friendly liens against your investments, and that changes the whole trajectory of how lawsuits perform.
Prashant Kumar, CCIM – How do these friendly liens protect the Passive Investments that you and I would do in somebody else’s syndication?
Mr. Kevin – Against my single-family residence is ours technically are free and clear. So we had the first mortgage. But the typical scenario, because I’m so busy I should be sucking my equity out of that and buying ten more homes, right? But I don’t have time. Putting a senior lien against what you do have title to but as a passive investor, you might have a relationship that you could do that and not infringe on anybody else’s investment. But what we would typically do is put a UCC one in the public record and that’s a uniform commercial code lien.
There are only two types of liens. Those liens against real property which are either called deeds of trust or mortgages and then everything else you own accounts receivable, your cars, passive investments, we can put UCC ones against that. We create a senior lien and don’t have to infringe on the syndicator or the person that you’re investing with.
Prashant Kumar, CCIM – What you are saying is yes. You are Investing your money with this indicator but there is a good idea that you create this Golden Mountain Company which should create this UCC one lien against all the assets that you own which are free and clear and any other investments also for that matter
Mr. Kevin – Yes, even partial investments as a second or third lien. What people don’t stop to think and lawyers, it’s just not information that’s out there is that less than 1% of cases go all the way to trial. So it’s your public image that decides whether a case is even going to move forward. And if it does, does it settle early for very small amounts or does it wait to every 11th hour? Because they’re hoping to get an extra million dollars on the table in settlement and contingency fees. Attorneys, if they are suing, they look at whether there are any senior liens. They’re not crusaders. They are in it as a business partner with the person that has a claim. They look at that and they say hey, normally I would make $8 million on the same fact scenario but there are lots of assets out there. But there seems to be they’ve been living the American dream. They’ve extended, their creditors extended too far and there are senior creditors. I’m not going to take the case. An hourly person will take the $5,000 from the client and do the same research but on the client’s time and then come up with the same answer oh, there’s a lot of investments, their name is in a bunch of places but there are all these senior creditors.
We better take insurance limits or we better take what we can squeeze out of this. They are going to encourage, they’re going to pound their chest in front of you. But behind the scenes, they’re telling their clients to take this piddly amount because we’re trying to squeeze blood from a turnip for a litigator to run an entire case and get $150,000 from a client and say, here’s your piece of paper. And oh, by the way, there’s all these creditors. That’s a formula for a malpractice case. And so having these senior liens in the public record.
We’ve been doing this since the very early ninety’s. We’ve had clients that have faced serious matters, and we’ve never had a structure busted. Most litigators don’t know. Most lawyers in any area don’t know our area. As to protection action, lawsuit protection is kind of an esoteric area. It blindsides these litigators, and those that have found out about it don’t know enough about it, and they still settle on pennies on the dollar.
Prashant Kumar, CCIM – Wow.
Prashant Kumar, CCIM – How trusts can be different parts of Insurance? I want that to be useful information for the loan listeners. How trusts are different from these senior Liens what are the different components of these?
Mr. Kevin – Yes, all the business entities that all your listeners are used to, the corporations, LLCs, and limited partnerships are considered separate legal people. Under the law, you have to treat your own company as if Kevin Day owns it. If you are an employee of your own company, you need to sign both as the employee that you’re accepting, and the deal that you’ve negotiated with yourself as president or manager. The corporation’s code and the IRS code say that you have to work with these entities as if they were third-party owners but they have to have an owner. They have to have a shareholder or a member.
In our legal system, there are only two ultimate owners. A flesh and blood human. Nobody owns you and nobody owns a lawsuit-proof trust. It is the ultimate owner. Nobody owns it. You’ll have a beneficial interest in it, and that’s what you want because that’s the good end of the stick but Corp can be owned by an LLC that’s owned by an LP that’s owned by a Corp.
It will not end until it hits you or a lawsuit proves trust. To get real lawsuit protection, you do not want to be the technical owner of humans. We drive cars. We have a woman client that just came to us recently, and she hit a pedestrian. There was a very large claim. She has two apartment buildings, and so it wasn’t a faulty smoke detector or something, somebody getting electrocuted. These are two cases that we had in the last four years against our clients, but luckily, we had senior liens. So even the building that harmed them wasn’t able to be taken away. This is coming in the back door. She had this car accident, and they’re saying, okay, what do you own? She doesn’t own real property. She owns LLCs that are owned by the Real Property. They come through the back door down the ownership chain. This is where lawsuit proof trust comes in, where under penalty of perjury, list everything you own. She doesn’t have to list those companies that are in her estate but are technically owned by a lawsuit-proof trust, for which she’s the full beneficiary. She gets all the income she can buy and sell the properties when she wants to, and so forth.
Passive Investment is like cash or a portfolio. It just happens to be in Real Estate, and you don’t want some incident happening to you personally and then coming and ultimately saying, oh, do you have any Investments in other people?
Do you have any notes payable to you, any of those things you want to be able to say no, I own my home and car, and as you can see, I’m up to my eyeballs? And hawks, there’s nothing to take.
Prashant Kumar, CCIM – What you are saying, and correct me if I’m wrong if I had it wrong, you’re saying is that along with the trust and the senior liens, you can potentially protect yourself in all the possible scenarios where any legal lawsuit that could come towards you because of the senior lien, you can protect your assets. And, because of the trust, you could still maintain your privacy and protect your assets.
Mr Kevin – Yes, those are two different strategies but working together is exactly as you outlined means that we have protected you and your assets from internal liability, those things inside any company, but also for anything that might befall you personally. From internal liability as well as external liability. What we do, we don’t want to rely on secrets. The way I define secrets is that if we told a judge or the adverse party what we did, all of a sudden it unravels and they can get to it.
We want privacy, not secrecy. We want privacy because, as I said, 80% of the time, adverse parties don’t see the structuring we’ve done in the liens related to our client. In the 20%, I should be able to go before a judge and say, this is what we did and this is exactly when we did it. Haven’t harmed anybody yet. The only way to unravel a lawsuit proof trust is to allege and prove fraudulent conveyance they had to have had already harmed someone. We did this a year and a half ago. It’s impossible to unwind this now. We don’t want to rely on secrets. Privacy is good, but should not be embarrassed to tell a judge the work we’ve done.
Prashant Kumar, CCIM – How can W2 employe/ small business owners take advantage of these things? What is the process? How much does it cost them? How often should they be involved with companies such as yourself? Please share some more thoughts on how can everybody be benefited from these things?
Mr. Kevin – Yes, offshore trusts aren’t inexpensive, you want to have an estate that’s 4 million or above, where we’ve seen our clients decide, all our creature comforts are taken care of. Now we have money that’s pushing the ball for us instead of us having to push the ball to make some money. And if something horrible happened, we want to make sure what we have is protected. And under the US. Sign the Hague Convention on Trust, which allows a US person or investor to use the trust laws of other countries. That’s very different than here in the United States. The most important thing under the US Law removes the US. Court authority over that trust. If somebody wants to sue, they have to sue in the Isle of Man or the Cook Islands or Monsieur, wherever we put up the trust. There are slight differences in the laws of why we would choose one jurisdiction over another. There are US domestic copycat laws. They’re still within our court system, but they are a lot less expensive. We get down to and they’re about $10,000 to give you a real number on that capstone to create an ultimate owner that you have legal deniability under penalty of perjury. You do not have to list, in our example Golden Mountain Funding, even to a direct question.
Do you own Golden Mountain funding? You can say no. But an underlying company, a Nevada company, let’s say a Wyoming company, is only $1,800 and your name isn’t in the public record, the owner isn’t listed. And we can, for a very reasonable cost, create a company that can act as your family’s piggy bank. We do have a service. We do what’s called a roadmap. It was $500. It just covers the cost of creating the structures and some diagrams and having several educational conversations with the client.
And we take a snapshot of what they have right now and how it’s held. And then ultimately, if money is
no object, what’s the perfect plan? And then what’s an intermediate plan to build there? Because many of your listeners will say, no, I’m a business owner, and I already have some real estate and I have some passive investing, and I have employees. I need up to an irrevocable trust, whether it’s offshore or domestic. Others are saying, I have a good enough estate, but I don’t have employees and I’m a passive investor. I need something to build into. And so I see the wisdom of an underlying company, but I don’t want to budget for a lawsuit-proof trust yet I’m going to rely on the privacy and the image I have in the public record so we can do all kinds of different steps for the clients needs.
Prashant Kumar, CCIM – How long is the process if somebody has to start from this roadmap to the ultimate destination, somebody with a net worth of approximately, let’s say, five to $10 million net worth. What is the roadmap for them? How do they kind of make themselves foolproof?
Mr. Kevin – Yeah, if we had a questionnaire on our desk today, it takes us probably about two weeks to create the entities and to draft the trust presuming. We got all the information that we need from the client, so certainly by three weeks, all of that is wrapped up. Now, the equity stripping strategy probably takes another week. So we’re creating the trust and the private company. The private piggy bank equity stripping company looks like a hard money lender. It needs to be alive before it can put liens on assets. Doing those transfers and putting those liens will take another week. Certainly, by four weeks, everything should be wrapped up. We can accelerate that. If somebody has a particular project.
I’m opening up a new business. I haven’t hired or paid any employees yet my service isn’t in the public record, but I want to open in two and a half weeks. We’ll scurry to make sure it happens. What is the cost for them for doing all this? A comprehensive plan with an offshore trust is going to be about $37,000. The offshore trust is going to be $30,000. Then the rest is the underlying companies because it’s all done in the package, we’ve carved off costs of other parts. A domestic version is going to be about $16,000. And that’s with the trust. As I said, the private company itself is only 18.
If we’re doing the equity stripping, that package by itself, it’s reduced if we’re doing the whole thing, but by itself is $6,900. So a lot of real estate people, active, not passive, say, oh, I know what a promissory note looks like, and I can do a second deed of trust and do all those things myself.
Then it’s just a couple of form a company and gives some advice. $2,000. Even people that are very experienced say, no, I need to stick to my knitting. I’ll write you a check for the $6,900 on top of 1800 just to have your office handle everything.
Prashant Kumar, CCIM – What I can understand is, that it is much less than $50,000. Even if you have to create an offshore trust if there is a need for one, and if it is probably less than, maybe, less than $25000 to $30,000. If you are within the United States, you are creating trust and all the companies and everything. Yeah, a very sophisticated and complex structure is going to be offshore, is going to be about $37,000, and it’s going to be less than $17,000 for comprehensive but domestic trusts.
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