Wyoming LLCs and Asset Protection Trusts for Real Estate Investors w/ Mark Pierce

so much the money that you make, it's the money you keep at the end of the day. Most real estate investors spend all their energy acquiring assets and almost no energy protecting them. Mark Pierce has spent forty five years on the other side of that equation as a bankruptcy trustee, tax attorney, and trust specialist. He knows exactly where the holes are because he spent decades finding them. In this episode, you'll learn how Wyoming LLCs and asset protection trusts actually work to shield your equity.

why the inside threats like a divorce in your family are usually the ones that take you down And the first moves to make if you're sitting on real equity and have done nothing to protect it yet. Check out Wyoming Trust Attorney dot com and let's get into it. Mark Pierce joins me here today and you can learn what he can help you with by heading over to wyomingtrustattorney.com. And I think the domain name says pretty much a lot what we're going to be talking about

today. wyomingtrustattorney.com. I really appreciate your time, Mark. You've got a very long, long history in your business and practice. I'd be appreciative if you would spend just a few moments talking through the process there. I know you handled some of these reins over to your son now, but your background is so impressive.

I think we should probably fill everybody in. Yeah, the trust side of it is just me, the LLC side of it him. Yeah, I started out, I got a degree in accounting from the University of Wyoming in 1975. Took them past a CPA examination on the first sitting. Went to work for a large accountancy firm. Didn't particularly care for it, so I went to work for an offshore drilling company. Hurt my back and ended up going to law school. Got out of law school, was primarily a tax attorney in law school.

in that first year out, first couple years out. And then went out on my own and became a bankruptcy trustee, continued the tax practice and got into mergers and acquisitions and then got into trust work. Because as a part of the bankruptcy, I kept looking at people and saying, why are they so naked when they go into bankruptcy court? Why do they not have any defenses against them? So I ended up doing trust work and, know, LLC work in conjunction with the trust work and

developed that practice over about the last 30 years in particular. But 45 years of experience in that field, including bankruptcy litigation, tax litigation, district court litigation, and my documents reflect that. I approach everything from the standpoint of accountancy and the standpoint of litigation. Well, I think what's really kind of interesting is that a lot of your history and experience has a lot to do with that side of the fence. So you're in a great position to actually understand what actually works because you were on the other side of the table, right?

Yes, exactly right. You know, I know where people's weak parts are. You know, you run into a lot of trust attorneys who will construct all types of euphemisms within their document that they think are going to go over great in front of a judge and everybody's going to understand them. Problem is the judge falls asleep about five minutes into it and the jury, well, they could care less. So you've got to be able to make points within the document quickly, easily, that's

understandable. Break it down, get it across to them and you'll win that way, generally. Well, let's talk a little bit about what trusts are. I mean, we're going to have to really simplify this. I just want everybody to have kind of a base understanding of what we're even talking about, the benefits of that, and how that's tied to Wyoming, because there's some strategies there as well, right? Yes, know, a trust is basically a contract.

between the trustee, the individual establishing the trust, and the plot of property that goes into the trust. That's all a trust is. They've been around since think the 1400s, 1500s in Europe. They've been in the United States since our founding, so they're not exactly novel here, but legislatures have gotten ahold of these statutes relating to trust and developed them over time. Now, in the state of Wyoming, we have what we call the Wyoming State Political Action

Committee, which is comprised largely of attorneys, accountants, most importantly banks, because banks have decided they'll do better promoting trust business and attracting that business into the state than they do with the collection procedures that they've got. So when you go into jurisdictions such as California or Washington, they're more pursuing what the banks are interested in. In Wyoming, they're more pursuing what's going to benefit a small family-owned business. So when you're dealing with businesses, $100 million and under, these trusts are

absolutely perfect for the ability to attract and retain assets into those trusts and to run those trusts for the benefit of the family. And then it protects you against the creditors of the beneficiaries, the creditors of the family, and it also protects you from the divorces of the individuals who get married and divorced within the family. It's called a legacy trust. So that's essentially what these trusts are geared to do. Well, let's talk a little bit about the structure there and how it actually protects the

individual. Yes, the first thing that you do is you establish a limited liability company. and you take your assets and you put that into that limited liability company. You have a difference between movable assets and immovable assets. You can't take a piece of property that's in Michigan, put it into a Wyoming trust and not expect Michigan law to apply to a Michigan piece of property. What you can do is you can take your stock accounts, your cash accounts, any movable asset, put it into a Wyoming LLC, domicile it in Wyoming, then have that LLC owned by an

asset protection trust so that you've got a double envelope of liability protection there. The Wyoming LLC is recognizable under Wyoming statute as a single member LLC, whereas in a lot of states it's not. And then the Wyoming Asset Protection Trust, if it's formed correctly as to movable assets, is protective of those assets. And there's a particular case that came across in South Dakota, I think it just a couple of years ago, where somebody in California had gotten a decree in a divorce action

requiring the beneficiaries trust, which was a spendthrift trust, to pay support in California. They took it to South Dakota to enforce it. And the full faith and credit cause of the United States says South Dakota has to give efficacy to that California judgment, which is true. That's the U.S. Constitution. You can't get around that.

However, the enforcement aspects of that judgment are decided under South Dakota law. South Dakota law came in and said, no, we exempt child protection payments in South Dakota so that that garnishment was set aside. And that's held up. That's been the law on the land for many, many years. You've got full faith and credit, but the enforcement mechanisms come into play in the state that you seek to enforce it.

So that's why with movable objects, it's really important to domicile them in a place like Wyoming. Domicile doesn't take much. I've heard a variety of situations here where, you know, we're talking about real estate. And I've, you've talked about LLCs. In your opinion, how should that be structured? Like, do you have an LLC in for every single business or property that you have? Do you group them based on the value?

And then based on that, do you have them owned by the LLC in Wyoming? I'm making this sound extremely complicated, but it's probably a lot simpler than that. Well, you know, if you've got a piece of property, let's say in North Dakota. and you have a Wyoming LLC that owns that piece of property, then the laws of North Dakota are going to apply to whether or not a creditor can get in to attach that piece of land. But let's say that you have an LLC in Wyoming that owns a piece of property in North Dakota, and that property generates money because it's a commercial property, a commercial

rental, residential rental, something like that. Then that money's played into that LLC when the LLC gets enough working capital. That LLC transfers that money either to a in Wyoming or another LLC, the Stamos Island Wyoming, and it transfers the money away from that property into Wyoming. So you end up with the land in North Dakota, but you end up with the cash in Wyoming. So if you get a judgment against that LLC and you want to enforce it in Wyoming, you've got to come to Wyoming and enforce it.

Wyoming will force you to litigate that again, and if their laws won't recognize that judgment in Wyoming, then that money is safe in Wyoming. So that's the protective aspect of it. you do with the businesses, typically each business you would put into its own LLC because you don't want the failure of one business to wash against the benefits of another business. But if you have two failing businesses, who cares? You can put them all into the same LLC.

So typically with real estate properties, you will put them into a series LLC or you'll put them into separate LLCs with a holding company above it. And then as you transfer monies into that holding company, the holding company, once it has sufficient worth and capital, transfers out to an asset protection trust. That domiciles in Wyoming for Dexter Cash. And I've heard multiple we keep talking about Wyoming. Would you mind doing a quick comparison between the other states that are typically

mentioned in the same breath? Yeah. Well, you know, Wyoming is interesting. We were the first state to come up with a limited liability company, which is basically a statutory organization, but you put together the operations in an agreement, not bylaws or organizational minutes. So you can structure that LLC, how you see fit. It gives you a lot of flexibility within it.

Wyoming is also one of the few states that recognize single member LLCs. So if you have an LLC that owns property, say in North Dakota, and it passes money to a holding company in Wyoming, that holding company is owned by a trust. company as one member, that's still an efficacious LLC. A lot of states do not recognize that LLC. And the only judgment that you can get against a Wyoming LLC is a charging order. Here's what happens with the charging order. Let's say that you have a bank comes in and makes an execution against it, tries to

execute against a membership interest that's held by someone in a Wyoming LLC. All that bank can get is a charging order. So if and when the LLC makes a distribution up to that membership interest holder, the bank can take possession of that charge. But what the Wyoming LLC statute allows you to do in your operating agreement is to have a contractual remedy where they can make, the LLC can make indirect distributions to somebody to whom that membership interest holder owes money other than the bank.

So you can get around it that way as well. The other thing you can do is create phantom income. You make a distribution for tax purposes that you still keep the cash in the LLC, but you distribute the cash out on paper so that you distribute the profits out and then the membership interest holder or in this instance the charging holder holder the bank has to pay the tax on cash that didn't receive so that has a tendency to really bring people to the table pretty quick to negotiate so Yeah, there's a lot to unpack there.

what would like you've probably unload a lot of this information to people and and a lot of these strategies are really new to them. What is typically the the the flow of conversation, like what what typically comes next in your world when they when they get this information for the first time. Well, it's like drinking water out of a fire hose. It's kind of minimally effective, isn't it? But that is water.

And you did ask for a drink of water. Well, the first year that you do it, all of these terms really overwhelm you. But you'd be surprised by how quickly you catch on to it because it follows a common sense approach and pattern and it never varies. So the first year, it's a lot of information. But, you know, let's be honest. People make a lot of money and they think that, you know, the sky's the limit. I'll keep doing what I'm doing.

They don't plan for the bad times. given our respective ages, we've had a lot of them. And my feeling is it's not so much the money that you make, it's the money you keep at the end of the day. So these strategies are something that a lot of you succeed when everyone else around you is failing. So by the second time that you begin to go through this, the second year that you go through this, or the second time you end up with troubles with your creditors, like, you

know, what was 2008, 2020, 1983, I can go back all the years that we had these catastrophes in Colorado, Wyoming, the cold states. and you realize this becomes kind of second nature to you after a while. I always tell my people by the third or fourth year, we're only having a conversation for really strategic things. The rest of it, you've got the administrative side down. So, you know, when I start talking about single member LLCs, charging order, protective orders, domestication of foreign judgments, discovery, exemptions, all that kind of stuff.

Eventually, if you get on the website and read it, we've got just an encyclopedia of information that's there. And we try to write it in common sense terms, common English terms, so that people, you the guy off the street, woman off the street can get into that, read it, and say, you know, that kind of makes sense. I'm beginning to get the nomenclature that goes with this stuff. And then after about a year or two, you know, they come up with some great ideas. And I've got a client who I've represented now for about five years who has really begun

to think about these things. And one of the really fabulous benefits that you have in Wyoming, was we have some called a non-shareable specific purpose trust without ascertainable beneficiaries. Now these would come up with in England to hold things like graves, grave sites or grave plots or art that goes into a mansion that sort of thing so that nobody can take and possess those assets away from a family. So what we began doing is we've been formulating from the standpoint of saying let's say they should get someone with a special purpose that they're going to do they can have an

LLC of corporation, why not put it into a non-shareable specific purpose trust? Because the trustee doesn't have individual liability for what goes on in there. There's no manager, there are no shareholders, and no beneficiaries. So at the end of the day, you can take this business, do what the business needs to do, distribute the monies out to whomever gets the business under the purpose, and then that's it. You're done. You can dissolve that non-shareable specific purpose trust, and you get rid of any

potential for liability. can't find anybody. So I have a client of mine who does Each one of the crews he does, he does separately in a non-shareable specific purpose trust with a Wyoming LLC underneath it and when he's done he maintains the insurance for two years and then he lets it lapse and it goes away. So that's the end of his liability instead of tagging along for 10 years after every cruise seeing if someone shows up to sue him.

Those are some of the things that you can do. Yeah, you're talking about some pretty complex, not just shouldn't say complex strategy, but pretty advanced strategies associated with some of the people you're working with. And just to remind everybody, if this does sound a little foreign to you, I would recommend you going over to Mark's website, there is a lot of great resources there. I'm going to have that as a clickable link in the show notes, but it's Wyoming trust attorney.com. you found some value in what we're chatting about so far, do us a favor, share this with

one of your investor friends. If you're watching us on YouTube, give us a like and subscribe. So Mark, a lot of what you're talking about is typically seen as aspirational type strategies. For a lot of investors, could you give us like the low hanging fruit, let's say somebody is getting is in real estate investing. They're sitting on some properties that might have 500,000 in equity, what is some of the first things that they should consider doing right

now that are like simple quick kills that they can maybe implement right now? Yeah, you should consider, and it depends on what your bank's willing to allow if you've got bank financing against the property itself. But what you should consider doing is taking that property and put it into an LLC to isolate the liability, potential liability from that property against you. And one of the easier ways to do it is these new series LLCs where you just have one LLC with series underneath them. Then you get an umbrella policy to cover the liability underneath it.

And then if somebody has a slip and fall in one property and has damages in excess of what the insurance coverage is, the umbrella policy should cover it. If it doesn't, they can't go back against the other LLCs and the other properties. So it isolates each one of those real estate businesses away from every other business that you've got. And I know back during the COVID crisis, we represented a company out of Denver that they had leased a fairly significant amount of space to a really good entrepreneurial

restaurateur. And guess what? He went broke. So he defaulted on the lease and they looked in and they said We want to sue this guy so we did some skip tracing or whatnot. We couldn't find anything in his name So they said well, what's gone on here? And I said, well, here's what I suspect and they said well we can break through all that and get to this guy Yeah, you know I can be honest with you by the end of the day if you

do get any sort of settlement out of that It's going to take you years to do it And by the time you get done you realize I should just take whatever money I've got left to go out and make some more money So he turned around and he looked at me said, well you know what, we need to start getting into that, we? He said, yes, exactly right. So that's what allowed them to survive through the corporate crisis, but my client took a hit on it.

So he reconstructed his liabilities within his corporate organization and went forward in the same manner. You just mentioned a term I think might be new to a lot of people, series LLC. Would you mind taking a minute and explaining that and what that exactly is? is not the first state to come up with this. fact, I think it was either Delaware or New York. And it was originally put together to deal with securities offering out of mutual funds. So you'd have a mutual fund at the top and then you'd have all the offshoots of various

investments that mutual funds do, municipal bonds, government bonds, ABC grade corporate bonds, that sort of thing. And they would have it in separate silos underneath it. But they just have one accounting mechanism. But each one of those funds separate. Well, it's set up the same way. That way you just have one LLC, but you have different accounting mechanisms underneath

it, so you only have to keep one LLC going. So this is a series LLC. It's perfect for real estate structure. I had a client who came in, 34 different properties. So you put one LLC in place, 34 different properties underneath it. I see. Okay, well, you have likely seen anything and everything associated with real estate investors and business owners all the time.

Like, what is the biggest mistake you see repeatedly made? People thinking that they're fully protected, but they're not. Well, you've got to keep books and records in order. You know, and you can't dip into the company till to pay private expenses. Those are the two things. Comingling, gets you into a lot of trouble. In Wyoming, we have something called the Closed Limited Liability Company. If it's a closed-limit liability company, their record-keeping requirements are

significantly reduced because they know that people sit around the coffee table and do what they need to do to run whatever their businesses are. Wyoming's a state that has a lot of small farmers, a lot of small ranchers, a lot of small businessmen. And by small, mean 10 to 20 million and less, but family businesses. So the biggest mistake they make, in my mind most of the time, is they focus on outside forces coming in and trying to get in. But what about the insight forces that come on?

And we've all gone through this. Your son or your daughter marries somebody and your first reaction is, oh my goodness, this is going to be terrible. And in five years from now, it does become terrible. Well, in the meantime, your child has gone out and gifted a portion of whatever it is that you've given them and they've become a member in your LLC or a member in your corporation. So the divorce comes along and all of a sudden you've got a really antagonistic partner out there

you have to cash out. With an asset protection trust or these LLCs that we structure under the asset protection trust, guess what? That's the most effective pre-neutral agreement that you're ever going to get because that course is going to enforce it against that outside element, outside inside element. So failed divorces, issues that happen with the kids, those can't get into your business or inside your trust to upset your family legacy. So I would think, you know, that's the thing that people have.

a tendency to plan against the least. you just mentioned something that I think when it comes to real estate investors, it's a bit of kryptonite is keeping your books in order. This is one of those things that I've kind of on on the soapbox preaching say talking about the this is one of those things that people really need to have have a little investment and get get somebody who knows real estate to get this done properly and get it off your plate if it's something that isn't something you're inclined to do yourself.

Is that you look yes, absolutely. I think it's the best advice you can give somebody. You know, I get all my taxes filed by the February 15th of the year after they come out. As long as I get my 1099s in, I'm ready to go. But you know, I was educated as a CPA. I know how important that stuff is. Plus, it just lags and gnaws at you.

So, my advice is get a good accountant, get a good bookkeeper, get the stuff taken care of, and stay up with it month to month to month to month. It's painful, as that might be. It's a lot less painful than having to do it all in March. So, I had a client not too long ago said, that accountant's a little expensive. Do you know of anybody who's less? And I said to him, I don't know of a single good accountant who's looking for work.

phew, nobody's going into that field anymore. Everybody's about our age or older these days. So that's good advice, but in Wyoming, under the closed limit liability statute, or closed corporation statute, you don't really have to keep very good books and records. Because in Wyoming, we know that no one keeps very good books and records. most of the time. That's not going to be something that allows them to break those LLCs up. So when you come to Wyoming and say, their books are terrible, they're co-mingling funds

and on and on, Wyoming goes, we don't care. That's up to them. They got a business, you know you were dealing with an LLC, tough luck. Yeah, you know, that's that's a lesson to learn from you too, is that you mentioned, you know, nags at you. Is that something that you learned along the way is that, you know, to, handle some of this, so it's just off your mind? Like, there's a lot of mental bandwidth that's just consumed.

Otherwise. I had a dear friend of mine who passed away probably about 10, 15 years ago who I mentored under. years and years ago. He said a couple different things. said, you know what? says, fast pay makes fast friends. And the other thing is when the bad guys are coming to town, don't stiff the sheriff.

So you keep your professionals paid, keep up to date with your professionals. You meet with them monthly or quarterly or whatever it takes and get that off your plate so that if something happens, you're ready to deal with it. Because if you're not ready to deal with it, it gets really expensive. And you're right, the bandwidth that goes into maintaining that level of acrimony that you have with yourself about the thing that you should do, but you just can never quite get to it. It'll come back to bite you.

It just reminds me like there's there's a couple things that are on my plate right now that are like I would probably consider quick kills that if I would if I would just do them. I'm talking about, you know, 10, 15, maybe 20 minutes. I could just get it done. But it's just this recurring thing that just keeps I keep revisiting and I could just just be done with it. You're you're perfect.

No, what are you going to say? when I first started practicing law, best I got, vice I got, was a guy who really mentored me well. I had several good mentors. I really think that I'm lucky. And he used to say, Mark, says, I'm going tell you something. When you come into the office on Monday morning and you've got three files under your desk that are barking at you, do them first.

And then the rest of the week will seem like a breeze. Yeah. advice. You know, you're you're a prime example of, of kind of pivoting and just kind of leaning into the direction that life is taking you, you know, you started off on an oil rig, you hurt your back, and you kind of found your next path. I mean, I mean, that's an extreme situation. But can you talk, would you mind talking a little bit to that?

Like, what? What are you wired in that way? Or is it just something that through mentorship, you found the path to where your life finally took you. I feel like a pinball on a pinball machine sometimes. And you look at the economies that have happened in the, know, North and South Dakota, Montana, Wyoming, and these areas, they're relying on natural resources. It's just been boom to bust, boom to bust.

And you you can get whiplash going, watching the economy go up and down in these states over the years. And I think that I grew up in a very entrepreneurial family and I watched what went on within my family over many generations. We started drilling oil wells in Pennsylvania in the late 1800s and ended up in Montana and Wyoming drilling them as well. And then put all our money into a field that had a number of explosions and fires. So everything kind of went up in smoke in the 1920s over by Newcastle, Wyoming.

You just don't know what's gonna happen. So you've got to hedge your bets. And like T. Boone Pickett says, you he says, you gotta keep enough money in your pocket to get to the next game if you lose at this one. And I always thought that was some of the best advice that I ever got. Don't put it all on the table. Keep some in your pocket, because you know it's never as good as it seems to be.

being exposed to that as a child and coming up in that way and watching what had gone on within my family is take a deep breath and get on with it. It's never as bad as it seems and it's never as good as it seems. Just keep moving forward. Well, Mark, this has just been such a great conversation. I feel like we've only touched the tip of the iceberg regarding this. Is there anything else we should have probably covered regarding at least the trust side of things before we start diving into rapid fire?

Yeah, you know, I think it's really interesting. know, people get these things in mind that, you know, trusts and trust funds and that sort of thing. Those are the Vanderbilt's. And you'd have to say, well, yeah, it was the Vanderbilt's, but look where the Vanderbilt's are now after 150 years of trust. So if you start now, best time, like the Buddha said, the best time to grow a tree was 20 years ago.

And the second best is right now. So take what you got now and plant it and move forward. It's for the benefit of your family. So I would imagine that some people come to you as this is kind of a reactionary effort. Like they're trying to avoid something. Could you maybe spend a little time regarding that and why that may or may not be a good idea? Well, you know, usually when you're avoiding something, some sort of catastrophe has

occurred and somebody's coming after you. And if you're involved with a lawyer, an accountant, and you're planning something, you have all sorts of devices that are available to you. When you're coming in trying to avoid something, the law changes and it goes against you. And you have much fewer opportunities to provide for at that point in time. So there are ways that you can dance around it, but you're gonna minimize the effect of bad news, but you're not gonna get rid of the bad news. If they come to you in a planning methodology, you're not gonna have bad news.

Well, Mark, this has just been fantastic. I'm going to point everybody to your website again, and we'll give everybody that link as well as check the description. I'll have those as clickable links. But if you're ready, Mark, I'm going to jump into the rapid fire, and we can close out this episode. Sounds great, thank you. What lie do entrepreneurs often tell themselves?

It's always going to get better. If you could go back in time and give your younger self a piece of advice, what would it be? Enjoy the scenery. Take a deep breath. Get involved with the people around you more. If you could do you have a book recommendation or what are you reading right now? there was a book that I read in 2015.

It's by a guy out of Iceland. And it's called The Coming of the Second Machine Age. And it's about the effects of AI and technology on businesses. And there's not one thing that he said in that book, and that's 11 years old, that hasn't come true. So AI is going to be the great disruptor, but it's also going to be the great enabler. So if you can grab a hold of it, you can do things that you can't imagine you could ever do.

And what is the great thing is it's geared for people who are neophytes in areas. And I know that my son, who's running LLS, He has used AI to do a lot of his programming and he is not a programmer. And he has basically taken the money that we put into the programming over the last 10 years in that company and made it worthless because you can duplicate it overnight using the AI programs. Yeah, I've joked many times here now the fact that I've been sitting on ideas for years and avoided them because it would have taken me a team of developers and tens of thousands

of dollars. And I put one up over the holiday weekend by myself. It's pretty crazy, the ability, especially if you're a little nerdy. You can get some things, some serious things done now. And then finally, what single tool or process have you implemented that has had the biggest time saving impact? You know, for me, I've hired pretty good people underneath me and I've given them clear and very specific roadmaps to follow and goals to attain and the means by which to

accomplish it and held them accountable. Great advice. Well, Mark, I really appreciate your time. Again, it is wyomingtrustattorney.com. Clickable link in the show notes. But hope you'll consider coming back again sometime. I think you're a great resource, and there's a lot to learn. Well, we have a number of things we can follow up on.

Thank you.