Own nothing & control everything
John D. Rockefeller once stated, “Own nothing, but control everything.” Basically what he meant was ‘what you don’t own can’t be taken from you’. This is the fundamental rule of asset protection that many people forget about. It’s like When Newton first saw the apple fall from the tree.
Millions of people had seen this before but few had articulated what caused the apple to fall.
This same shallow thinking once applied to asset protection. In the early 90’s, very few had articulated how asset protection works. In 92’ I started writing about asset protection. After five, six years, it started spreading like wildfire.
The fundamental rule is that you should own nothing. But control everything. So what you don't own can't be taken from you. Let me give you an example of this.
Let's pretend you just had a new baby. Let's call her Sally. You give Sally $10,000 to help set her up for college. Well, let's examine what could happen a year or two later if a creditor comes after you.
Can a creditor get that $10,000 you gave to Sally?
Well, the answer is categorically no. As long as your gift to Sally isn’t considered a fraudulent conveyance, then Sally becomes the new owner of that money. Sally isn’t your guarantor. She isn’t you.
This way if you get yourself into debt, creditor or legal problems, she can’t be held accountable for your mistakes. You’ll be in good shape as long as the money is under Sally’s name and as long as it’s not considered a fraudulent conveyance. You can make transfers to entities in a asset protection trust and still retain control over them. Just like the Rockefeller’s control over their assets.
Even though the money is now in Sally’s name you can still spend it however you want. You can still day trade with it. You can use it to start a doughnut shop.
You can use it to buy a boat, buy an airplane ticket, or make a house payment. You can do anything with that money except now it’s no longer vulnerable to creditors. As long as it’s placed in a properly designed entity, normally a trust, it will stay protected.
What you do not own cannot be taken from you. This is the fundamental rule of asset protection. It's part of the Fair Accounting Standards Board’s rules. These rules govern all CPAs and other accountants. So just take 10% of the time you spend making your money, protecting your money. This way you'll be able to keep it through thick and thin.
Remember the two fundamentals:
- What you don’t own can’t be taken from you.
- No country automatically enforces US judgments.
Those are the two bottom-line basics for asset protection and serve as the foundation for this key principle. Proper planning allows you the advantage of forcing people who sue you, (or try to sue you) to do it in places where a US judgment is as worthless as a burnt-out light bulb.
This is not to say that assets have to leave the USA to be protected, they don’t. You simply use a foreign trust to force creditors to litigate abroad, NOT to move your money there.
Here’s how to ensure that you can choose your battlefield, if your assets ever become the target of attack. The first step is to “give birth” to a new entity, (the trust), which will technically be living in another country. We’ll call this a foreign trust.
This trust is a NEW creation, like a brand new baby, and thus owes no one anything. This trust needs to be created in a country that does not automatically recognize US judgments (and remember, this is the entire world since no country in the world automatically recognizes US judgments).
Now here’s the best part. Even though the trust is foreign, your assets can remain where they are, under your control. This trust is treated as a foreigner for debtor creditor purposes. Traditionally, good solid asset protection will involve an offshore trust. It satisfies both fundamentals: it is foreign and it is not you.