Hello, Rob Lambert here with Asset Protection Training. Today, we’re taking the second segment of the nuts and bolts training and today we’re going to meet the players. We’re going to meet them a little bit closer than yesterday.
I’m going to start with a simple overview of the same materials I gave you last night. And I hope you were all was able to read the book I gave you.
If you didn’t read Chapters 1 and 3, you should stop this video right now, go take the 30 minutes it takes to read it and then come back; otherwise you’re cheating yourself and you’re not going to get the vocabulary or get the understanding necessary to do justice to yourself and to me, you and your family. So go read that then make sure you settle in and enjoy this.
Now, you saw this diagram in yesterday’s class and again, it has a settlor, a foreign trust company, a protector and beneficiaries. You’re going to get to know them a little bit better by the end of this short session. This is for a non-kinetic plan. This is a plan in which we do not have a U.S. trustee.
This is a plan where the typical settlor/U.S. trustee, they are usually the same person, is not kept in control. This is a much safer and much more traditional way to do asset protection planning; and if you decide that you want to do asset protection planning yourself, this is the type of planning you should do and I’ll explain why later on. The fundamental reason is that there’s a lot less that can go wrong with the type of trust I’m about to show you. Anyway, you’ve got the settlor, a foreign trust company, protector and beneficiaries. Let’s go meet them in greater detail.
This is a typical asset protection trust that’s – this one’s done for Thames Trust in Saint Lucia. It’s a good trust company. It’s a great trust company. In fact, it’s run by Nicolas John. He’s got you know, several law degrees. He’s trained in London like everybody in these little countries and is somebody I’ve dealt with for 20 years. I give him a lot of work and I just pulled one of his trust agreements out to use as an example through the link above.
This would be where you would start if you were doing a typical, a non-kinetic asset protection trust which is what you should do if you need asset protection for yourself. All decent trusts have good tables of content. This is a simple table of content but it’s a simple trust.
It’s not 100 pages long. It doesn’t have a lot of complex provisions and that’s why it’s a perfect place for you to start. Tonight when you’re finished with this lecture, you should read this entire trust. Force yourself to read it. Read through the paragraphs you don’t understand because by the end of this course you will understand them; and if I haven’t done a good enough job to cram it down into your brain by the end of this course then you need to ask questions and make sure I do, because every word in this trust should be very very comprehensible to you once you’ve finished your training.
Okay, here is where they all start. They all start with a settlement provision. This one starts with paragraph 1, the settlor. Now, you all remember who the settlor is. The settlor is the trust maker. The settlor is the grantor. The settlor retains a lot of power but in this case, less power than a typical kinetic plan and you’ll soon see it. But let me just show you – I put some little red notes on the right so when you go through this you can actually take special notice of the people being introduced.
Paragraph 1, we introduced the settlor and that will be you. That will be the typical client. Paragraph 2, we introduce the trust company. Why did I pick this one for this example? Because I use them a lot! Why do I use them a lot?
Because they’re affordable. Because they’re honest even though I tell you that you should always assume the trusties are crooked. These guys aren’t and it’s good to have a trustee in a safe, secure jurisdiction. Saint Lucia, I like a lot because it doesn’t have any trouble. It doesn’t have a lot of crazy laws.
It doesn’t have a lot of people that have come there after stealing, you know, $7 or $8 million from Bear Stearns or cheating little old ladies out of money as the Andersons did. It doesn’t have that. It doesn’t have a history of money laundering and hiding dope money. It’s a little banana republic that is just in the last 20 years, 25 years developed their financial services industry.
So, you might actually consider it as a place to start because you’ll soon see if the rubber really meets the road and it gets tough, you’re probably going to move your trust company from where it started to another country; some country with a greater and more meaningful laws. I just don’t like to start in the trust companies with the tough laws because they have a taint to them. I think you should always remove any taint of unseemly protection.
What we’re really doing is protecting your family. We’re doing a state planning, and we’re providing for future generations and you never really want to make your State planning look like asset protection is the primary motivation. It often is and it’s a perfectly good legal legitimate motivation. I like that you’re taking the less visible, less outlandish approach and being a little bit under the radar. Anyway, in the first paragraph, you can see paragraph number 1 at the top, we introduce the settlor.
Then we introduced the trust company. We talked – we did the whereas provisions, they’re almost all the same. Every little trust is different but it doesn’t matter, keep going down. You see here paragraph 1 in the settlement? In this settlement, the following expression shall unless the context otherwise requires have the following meaning. Well, here we are, we’re introducing beneficiaries.
Paragraph (a): The beneficiaries, and now you’ll soon see paragraph 3.2 and you’ll understand this. I want you to actually follow this through. Follow this through when you print this out, but here we have beneficiaries. It’s always important that the asset protection trust have beneficiaries in addition to the settlor. It is very traditional for the settlor to be a beneficiary.
Some so-called self-proclaimed gurus claim that that’s unwise, but that doesn’t work with real people. Real people, when they set up one of these trusts, wants access to the money. They want to have access to the money when the financial seas are calm without asking anybody and without amending any trust. So, a 9, probably 9.5 out of 10 cases, the settlor will also be a beneficiary. But you need something other than just the settlor, a wife, kids, somebody in the future generation, even a charity always have beneficiaries other than the settlor.
Now, see paragraph 1(b), excluded person? We’re meeting a new player. Excluded persons are not common to American Domestic Trust. Excluded persons are very common in asset protection trust; and often if you have an enemy or you have some entity or some human being with a judgment against you, they will actually be specifically excluded.
I can’t tell you how many parents exclude their daughter’s, husbands and oftentimes their son’s wives at least for a certain number of years because they’re worried about having built up a family nest egg and some girl or some guy gets married, and the love of their life ends up taking their family fortune from them. So parents oftentimes protect their kids by making the children’s spouses ,soon-to-be ex in the parents’ minds’ spouses, excluded parties.
Here we go down and see in paragraph 1(c) the term protector is defined, and you’re going to see that we’ll be meeting and looking at the protector in greater detail in this document. But the protector is normally – I’m going to – before I move on, the protector is normally there simply to police the trustee. You’ll soon see- and I’ll read it to you in a minute, that the protector has little or no power to make any overt action that affect the trust fund at all; but the protector has a lot of power to stop the trustee in his tracks.
You’ll see in number (d), he introduced the trustee, and you know that the trustees are the ones that operate the trust. They have all the power really once the settlor has appointed a trustee. You’re basically in this trust delegating the power to run that trust and control your money to your trust company.
And, you know, I always say that you should never trust the trust company; but I’m going to take some of that mystery out of it as long as the settlor or my client is on the account with the trustee, a signatory on the account then my client is never vulnerable to theft. So, I don’t really have any problem with this type of trust, as long as the trust is set up; and the banking accounts are set up to require the okay of the client/settlor to make a withdrawal, and that can be a simple agreement with the bank that the bank is going to verify major withdrawals you can even say above a certain amount. That’s a very common provision, a very common way to keep people safe although most people don’t do it and I don’t know why. They just don’t worry about – they don’t worry about the protection of their clients. They assume that the trust company has been in business for a long time, so it’s got to be safe. I just won’t make that assumption.
Now, here’s another concept. See paragraph (e). Let me move this a little bit to get it more centered. Here we have the trust fund. This is the stuff that’s put into the trust. The trust fund normally requires that the assets that become part of the trust fund are actually accepted by the trustee. Every trust is different, but the trust fund is what the trust company has that the trust is funded with. We have another concept, you noticed my little boy is just here helping you. 0:12:26.3 [I have a kitty that’s helping.] This trust uses the concept of “Vesting Day” and it’s really a provision designed to make the trust last for 120 years like a dynasty trust. The reason I’m pointing this out is there is a concept called the rule against perpetuities. It’s an old English concept and you’re going to see it in tons and tons of trust. They’ll usually say that the trust can only last for a life in being plus 21 years, and they usually will define the royal family in England as the family that has it.
In paragraph (f), you see the concept of “Vesting Day.” This is important for two reasons. This is normally called the trust period, and trust period is a big deal in many parts of the world. Trusts are traditionally limited by something called “The rule against perpetuity”; and you’re going to see the reason I’m taking some time on this is that in almost every trust you see, you will see some provision making reference to the royal family in England. It will talk about all the members of the royal family, and it will say that under any circumstances, trust is going to last for at least a life in being plus 21 years. They measure the life, and being by the royal family in England, it’s just traditionally done that way.
Basically, it means you get – if the youngest person in the royal family lives to be 90, you can go 90 plus 21 years, your trust is good for 110 years. The many States and many countries now provide that trust can be much longer. In some places- unlimited duration, but you’ll almost always see a concept such as “Vesting Day” or the rule against perpetuity. You’ll also normally see a provision that allows the trust to be shortened under certain circumstances after the passage of a number of years. That’s not part of this trust. It’s not necessary for this trust. This trust is a simple wonderful understandable lovely agreement. So, anyway, that’s the concept of “Vesting Day” or trust period.
Now, go down to the bottom, paragraph 2, governing law and power to change it. This is a Cuba clause. We hide the fact that we’re basically saying to a U.S. judge that we’re going to change the ballgame. If you read paragraph 2, you’ll see it gives the trustee the power to change the rules that are applied to the trust assets. How do you do that? You move the trust.
Now that seems like an arduous terrible hard process. Oh my God, we’re going to move the trust and I’m going to show you some real Cuba clauses in about three more lessons. We’re going to be going through – we’re going to take a whole lesson on what a Cuba clause is; but for now, I just want you to read it and get a little understanding of what it is. Sometimes you want to have a different set of laws apply like Belize. It specifically does not recognize divorce proceedings.
In Belize, an asset protection trust is always going to hold up when challenged in a divorce, it’s just statutory. Well, in this case you might want to start in a place like Saint Lucia but move it to a place like Belize. If a divorce was the issue that was, you know, that was causing any fear or desire to migrate, and I want you to note in paragraph 2- see this little red note the word may, it has become very common to make Cuba clauses not mandatory.
It started out 25 years ago or 20 years ago that we always made them mandatory, and that became awkward and it also started when the tax laws changed about seven years ago. If you had a mandatory Cuba clause, your trust was almost always considered a foreign trust. In many cases, we can have this trust be treated as a domestic trust. If the assets remain in large part in the United States, possibly in the family limited partnership I discussed yesterday; and if the trust agreement submits itself to the law of a State, that’s not so in this case, this would be a foreign trust if the assets are managed in the United States. Many times these are structured to keep them domestic for tax purposes.
It doesn’t change the amount of tax you pay. It just changes the manner of reporting you have to do. There is a simple little five-page, it takes 30 minutes of or 20 minutes for any CPA to fill out. It does not increase your tax liability that you need to file if you have a plain vanilla foreign trust like this one would normally be. That also is the simplest and easiest way to do.
I’m going to move on to paragraph 3, the power to add and remove beneficiaries, settlor’s testamentary powers. Well, paragraph 3 is very traditional. It’s the trustee’s power to change, add or remove beneficiaries. The trustee-now this is important, the trustee will normally not do anything without the input and advice or direction of the settlor. The trustee has the power to do it without asking, but traditionally they won’t; and in most of these countries that provide trustee services, the trust companies are very very very sensitive to watching out for their client- the settlor and in most cases they ask for a letter of wishes.
This letter of wishes can be changed over time. The letter of wishes gives guidance to the trustee; and even though they’re not legally bound to follow it, you will find that they treat letters of wishes like the holy grail. They don’t depart from what’s really instructed in the letter of wishes, that’s something that I’ll be talking about more in the future. When you go to paragraph 3, look at the third paragraph.
The settlor – this is the settlor’s power. This is your power if you’re setting this up. The settlor shall notwithstanding anything here into the contrary have the right to designate by will or testamentary document. That usually means something signed properly and often witnessed. Witness it with whatever, whatever type of formalities are required in whatever jurisdiction you’re going to. If you witness it as a will and in the United States, it will be almost always safe, but it’s a simple matter to simply get on the phone, talk with your trustee, see what they need and then overdo it. Never underdo it, always overdo it. The settlor has the right to designate by will or testamentary document the trust assets and/or the share of trust assets to or for the benefit of beneficiaries, and to exclude a beneficiary.
So, the settlor has the power to make people beneficiaries and to exclude people. For instance, many trusts have contest provisions. They have lots of things designed to penalize anybody who tries to get in the way of the management of the trust, and it is very common for somebody who challenges the trust to be made an excluded party.
So, when your daughter turns 18 and runs off with the local Harley guy and wants her inheritance early and you tell her no and then threatens to sue you, with the right type of contest provision and the right type of structure, she’s likely to become an excluded party. Well, when she’s 25 she might have gotten her senses back, and you probably don’t want her to be an excluded party. This gives you, the settlor, the power at any time to remedy those types of problems. It’s pretty neat.
Now, paragraph 4 down or paragraph 3 down are what’s called powers provisions. You’ll see that a majority, a large part of this trust is focused in on making the trustee, empowering the trustee with the same type of power that a human being has over his own assets and that’s important. If you don’t give the trustee tons and tons of power, you’re going to have trouble. I’m really going to go through this fast, and I expect you to read this tonight or tomorrow. You’ll see that there’s almost nothing that you can think of that the trustee doesn’t have the power to do.
Paragraph 12: We’re going to go over – we’re going to have a whole day on the duress provisions or they’re often called freedom from outside interference provisions, because that’s a nicer way to tell a judge you’re disenfranchising him. Judges hate duress provisions.
Judges really really feel insulted by these so they’re often written with a little more obfuscation than this, but I wanted to show you this one and then we’ll come back to this later. Rome isn’t built in a day. You’re not going to learn everything in one or two or three sessions, but I want you to read this. I want you to force yourself through this, and I want you to just let me read you the first part of the duress provision.
The trustee shall not respond to a request, court orders or any other directive from any other source whatsoever which instruction, court order or directive is a result directly or indirectly of an Event of Duress. It goes on to define events of duress and you’ll find that one of the definitions is a nasty lawsuit that’s about to tear you a new- tear you in two. So, you’ll love that. We’re still on powers provisions. You know, we’re on page 9 of the trust and we’re talking about paragraph 14, trustee’s power to invest. I’m just going to keep flipping through. I’m flipping through powers provisions.
You’ll see powers, powers, powers. Most of these powers or many of these powers require the written consent of the protector, and if they don’t, you oftentimes will put that in. Many clients – most of my clients, in fact, are control freaks. They have made their money. They have been screwed and tattooed 50 times before they decide to go spend money to protect themselves, and they simply say I don’t want to be screwed and tattooed again. I’m not going to trust the trustee, and I’m not going to trust anybody, so I want my protector who’s oftentimes in my trust- I let the protector be the client’s settlor in some cases. You make it so that the client’s settlor functioning as a protector has the power to block most actions by the trustee.
Now, it would be considered bad form to make a client the protector and it’s only – you can only do it if you have a sincere understanding of what’s going on, and you’re smart enough to know when and if you need to get out of that provision. That’s what happens with a kinetic plan.
This is not a kinetic plan. This is set up as if you’re in what’s called red alert status on day one. This trust will hold up or should hold up under almost any circumstances, as long as when it was funded it was not funded with a fraudulent conveyance. Remember one of my earlier videos when I talked about the rules? I said, “A trust is a new baby; and if you give the new baby some money, that new baby gets to keep that money and that new baby is not responsible for your debts”. The only way to extract that money from your new baby is to claim that the act of giving that money to the new baby was a fraudulent conveyance.
That’s why this type of trust is best done when the financial seas are calm. If the financial seas are calm, you can be almost- you know, you can really be comfortable that your transfers are going to hold up. What you don’t want to do is just blithely shut your eyes and engage in fraudulent conveyance and hope that they hope that they hold up. That’s what gets- that’s what gets everybody who does asset protection incorrectly in trouble. You should never ever ever do that.
We’ll talk about that in great deal detailing where the lines are, but you know- again, this is great trust for just pulling out- reading. This trust will take care of 90% of you just the way it is without almost any changes. It’s not perfect but it’s damn good.
Oh, here we go. This is another concept. See paragraph 18? This is the trustee’s dealing with third parties. You’ll notice in all trusts- and it gets much more aggressive than this trust, the trustees are protected. They’re usually indemnified. They’re usually held harmless if something bad happens, this really freaks people out. The bottom line is you’ll never get a trustee, an institutional trustee without those provisions. It’s absolutely common in the rest of the world, and you also need to remember that even though Rob Lambert-you know, holds his head up high and says don’t trust trustees; the people who are trustees are normally the- you know, leaders of their community. They’ve usually been there for a number of generations.
The trust companies have been there for many many years, and they are usually the pillars of their community. So, they get kind of irritated with me when I say don’t trust them. I still say don’t trust them; and you’ll note that some of them will be speaking to the- you know, us at this site that- you know, that there are several that have asked if they can do videos introducing their countries. Well, they know that I say- assume they’re crooks; but you know what, you better make sure when you choose them that you really think they’re not. Always check references, and just don’t be upset when you see provisions where the trust is required to indemnify, defend and not even go after the trustees for simple negligence. Usually, the only times you can go after the trustees is if they really engage in reckless behavior.
So, paragraph 18, 19, 20, 21, 22, 23, 24, 25, these are- and even 26 and 27, are all provisions designed to make the institutional trustee relax and be willing to take your assignment. After all, you’re asking them to take on a very substantial fiduciary responsibility without too much compensation, at least the trust companies I’m going to refer you to. If you want a fancy trust company, there are Cox and Wilkerson in Bermuda, Coutts & Company, that’s Queen Elizabeth’s trust company. They’re a huge huge great trust company; but they’re going to charge you a percent of your assets under management in tens of thousands of dollars in fees, and most of my clients don’t want to trust somebody else to manage their money. So, you know, I guess I deal with different types of people.
Now, paragraph 29, this is great. This is the protector’s powers. I want you to all read this specifically. I want you to all read this tonight before the next class- but look, the protector can basically say no to anything. The protector can get out of anything. He can leave. He can be reimbursed. He’s not liable for anything. The protector is protected almost like the trustee.
Paragraph 30, no benefit for excluded parties. You know it’s a new concept, but don’t you like the fact that if you put Joblo, the guy who’s been suing you every time you get two nickels to rub together as an excluded party, he’s going to be SOL when he tries to go to Saint Lucia or Belize or some place to go after your money- and by the way, once he goes there, he’ll soon become dismayed because he will quickly find out that your money isn’t in those jurisdictions. One of my rules- and you all, I hope took my little course on rules. One of my rules is, your money should not be in the same country where your trustee resides. This is basically the end of the trust.
You’re seeing it. You got the schedule where you have the trust fund. You put the assets there. What you’re putting into it- in the second schedule, the beneficiaries, which you can change at any time. That is a simple plain vanilla, generic, non-kinetic asset protection plan- asset protection trust. This thing is powerful enough to stop the largest creditors in their track, and it’s all of 21 pages long.
Yeah, it’s a little crude. Yes, it’s a little simple, but it does the trick. Do you know what? A human being can understand it. It’s written in English. So, this is a good one for you to start with. Please read it tonight and get a good understanding. Next lesson is on common provisions and I look forward to that. In the meanwhile, do your homework, make sure you read the book and make sure you read this trust agreement before our next lesson.
Download PDF: Example Non Kinetic St. Lucian Asset Protection Trust