[bruce511]

Well yeah, there are two systems, and so two paths that get followed.

I don't mean legal systems, I mean financial systems.

Most people live in a world where they have to own something to have it. They buy a house to live in, a car to drive and so on. The law can decide you owe something so they take an asset that you own.

But people with wealth don't generally live like this. They structure their financial lives to separate value from risk. They control wealth, they use wealth, but they don't "own" it.

Joe Public and the media are bad at understanding this distinction. They equate wealth with ownership. The law understands it though, so Joe Public doesn't understand the law.

The solution here is not to rail against the system. The solution is to understand it, leverage it, educate and be educated. There are legal structures that exist to protect assets. Yes, you need to reach some level of success to make use of them, but lots of people reach that level and don't use them, thus exposing unnecessary risk to those assets. If you "own" a business of any size, you should get educated on this.

[k8svet]

What on Earth difference does this distinction make to "Joe Public", exactly, given that they lack the wealth to navigate these systems?

"Ooh wow, I better understand how the system is specifically structured to grant inherit privileges to those with wealth, now I feel... ???"

[bruce511]

Your definition of wealth, and mine, might be different. I would describe anyone who owns a home, or business, to be wealthy. (If you own both, also risky).

Navigating these systems takes an education you can get for free, and a few hundred $ a year. Obviously there are lots of people who are not wealthy, for whom there is no risk and hence no need to reduce risk.

Getting educated about asset protection is not bad to do before you acquire assets. Just like the legal structures and implications for marriage are best learned before, not after, getting married.

You don't need to be wealthy to be educated on the topic. Those that plan to get wealthy might find it beneficial to learn about this before they "lose it all". Lots of people learn how the world works "the hard way". I'd prefer you didn't.

Naturally those with unprotected assets are also the juiciest prey for those who thrive on the misfortune of others.

[k8svet]

Maybe I'm just really ignorant but I don't totally understand how to mitigate the "risk" (?) of home ownership? For a few hundred dollars a year? Does this just refer to home owner's insurance, or something more?

I have (by my stnadards) a high NW, much of which is non-retirement accounts, but some of that is due to my having virtually zero non-monetary assets to my name. I guess I'm curious what I should be looking out for, if and when I pick a place to settle and purchase something.

I guess at the very least, this is something of a reminder that I should be purchasing decent traveler's insurance, especially in lieu of an American rent.

BTW, I appreciate you engaging me kindly, when I had somewhat glib replies earlier.

[K0balt]

Significant assets (anything over say, 10k in value) should probably be owned by a trust, corporation, or anonymous offshore LLC or foundation. (Escalating by value). The cost of doing this runs about 300-1000-3000 a year.

(complex, basically impenetrable systems that also can effectively shelter large sums of money and eliminate huge swaths of tax liability usually cost around 5-10k a year or so to maintain),

These systems of ownership/control protects these assets from risks such as personal or business liability, divorce court, bankruptcy, etc and at the more sophisticated levels can create cash sinks to eliminate vast swaths of tax exposure while tucking cash and other fungibles away in effectively untouchable zero-tax jurisdictions.

This is a system quietly utilised by virtually every international corporation as well as the vast majority of people with significant wealth. It is gravely underutilised by people of modest wealth. A trust provides very strong protection for multiple assets for less than 30 euros a month in many cases.

It’s worth noting the obvious, that one entity can hold many assets so that the cost is spread over your entire risk position.

You should speak to a financial advisor and also look into ways to charge off surplus cash reserves offshore if possible, though it’s possibly too late to do this in an ideal way to reduce your tax exposure.

The goal for fungibles is to move your profit centres offshore to better tax jurisdictions, and although this sounds complex, it’s not really that difficult.

An offshore can hold your IP, and your local can lease that IP from the offshore, absorbing the majority of your revenue, for example. Or you can set up a private insurance company so that all insurance costs go offshore. Offshore private retirement funds are a thing.

Offshore companies can hold assets that you then lease from them, such as real estate, vehicles, boats, planes, etc. They can be very profitable, tucking those profits away in tax-favourable jurisdictions while absorbing large chunks of discretionary revenue from your operations in less tax-favorable situations.

All of these can have tax advantages for avoiding taxes you don’t need to owe, and most of them create very very deep legal moats around the assets that you seek to benefit from.

The mechanisms for relinquishing legal ownership and direct control (therefore liability and vulnerability) while retaining the use and benefit from your assets are sophisticated and well established.

[sanderjd]

This is all very bad for our society. But maybe I do agree with you that more people of modest wealth should take advantage of it. This would make the problem more visible, and thus more likely to be fixed.

[Teever]

I've come to this counterintuitive solution too.

There are a lot of things that people do in society which I've declined to do as well because I feel that they're wrong but I've come to realize the way to make people stop doing those things is to just do them in a really oafish way so that the public sees how bad they are and hopefully they'll fix it.

[K0balt]

I agree, especially in the case where only the wealthy are doing

[bruce511]

How far you go down the road of using structures for tax avoidance is up to you.

However it should be noted that the use of on-shore trusts to separate assets from risks and liabilities does not intrinsically have either a tax-saving goal, or a tax-saving effect (depending on your jurisdiction.)

Personally I make use of asset-protection structures, but in an on-shore context. I live here, I enjoy benefits here, and I'm happy to pay my share of taxes here.

My point is that offshore trust structures, and onshore trust structures (among other options) have very different use cases, tax implications, and costs. Use of one does not imply use of the other.

[K0balt]

Definitely. I certainly did not mean to conflate tax avoidance and asset protection, even though in some cases they go hand in hand. I apologise if I was confusing in my explanation.

[rblatz]

I assume you own your house instead of a trust owning your house. Start there

[k8svet]

(First, thanks for the hint. Looking into trusts in general has been on my todo list, but also) I guess I'll embrace the ignorance fully. What if I have a pile of money and no house, do I need a trust? What amount of money or (future) house do I need to justify a trust? What does the trust even do for me?

Or maybe a better question, where's the "oops I have a pile of money, now what" literature I should read?

[bruce511]

It's probably a good idea to talk to a financial advisor. You may need to talk to a few before you find someone who understands your goals and what is on offer. A good one will be able to explain in clear terms what each option accomplishes.

For me, the goal is to separate assets from liabilities. I own a business and that business has creditors, some of whom require me to be personally liable.

So any asset I own is "at risk". I'm not expecting a problem, but life happens sometimes.

If I have a house a creditor can force the business into bankruptcy, and my house can be lost. If the house is not in my name (say its in a trust, or perhaps my spouses name) then it's not "mine to give". In simple terms if I hold liabilities and my wife holds assets, (and we have a suitable marriage contract) then creditors can't take those assets.

Obviously making creditors whole is the goal, but that can be done well, or badly, depending on your juciness.

Everyone's situation is different. The legal framework is different in different places. Which us why you need an advisor in your country / state to assess your risks, and possible mitigations. Don't just take advice from the Internet, or even your buddies. You need to understand your goals and needs.

Trusts can be an important part of the equation, so that's sometimes a good starting point to evaluate advisors. Even if you don't need a trust you want to feel like the advisor understands them etc.

[Repulsion9513]

Ah right so because you can afford your mortgage payment you should also... be able to pay a lawyer and form an LLC and throw a bunch of money at it every year?

(Also as I said elsewhere in some states - Texas - they can't seize your home anyway, excepting stuff like mortgages)

[bruce511]

It's not as simple as that, and will differ from person to person based on their situation, risk profile, and jurisdiction. Consult your financial advisor to see the best approach for you.

[K0balt]

Significant assets (anything over say, 10k in value) should probably be owned by a trust, corporation, or anonymous offshore LLC or foundation. (Escalating by value). The cost of doing this runs about 300-1000-3000 a year.

[nothercastle]

It’s hard to get access to a professional that understands how to do this legally and can advise appropriately. Most financial advisors just peddle overpriced high fee index funds. Like how do you even find someone like that.

[mrandish]

There are law firms that specialize in setting up trusts. We found a local firm who handled setting up a trust for our family and it was pretty straight forward and not very expensive. If your family has assets >$1M it's definitely something worth looking into (and quite possibly for lesser amounts too depending on your situation).

There are a variety of potential benefits (tax, inheritance, legal liability, etc) but one that shouldn't be underestimated is how much it can simplify the paperwork, process and delay at death vs just having a will. If you are elderly and have kids, creating a proper trust in sync with your will is one of the nicest things you can do for your kids. Having recently been through the death of a couple of parents, one who left a well-organized trust and the other who just had a standard will, the difference in work required and stress involved was night and day.

[bruce511]

Onshore trusts are simple to set up and administer. Google "trust accountant" and you should find someone in your area.

[sanderjd]

No, I disagree that the solution is to understand and leverage this system. It is good to identify things that are bad and advocate for changing them. Yes, it is a useful step to understand the details of how things work and how they came to be the way they are, but that does not imply accepting them as inevitable and playing along.

[Repulsion9513]

> Joe Public and the media are bad at understanding this distinction. They equate wealth with ownership. The law understands it though, so Joe Public doesn't understand the law.

Or Joe Public believes the law is wrong and understand (correctly) that the relevant metric is practical wealth rather than whether or not some fictional entity theoretically owns it.

[gorgabal]

But if the system is unjust it is also our moral duty to attempt to dismantle it no?

Just accepting the system and abusing it is not going to make the world a better place. This is why other commenters are upset, as you blatantly abuse immoral structures.

[bruce511]

The systems exist for a reason. Losing my life's accumulation at age 60 to a greedy or unscrupulous character is not a risk I personally want to take.

But if you feel that you can dismantle the system, then by all means go for it.

Personally I don't want to dismantle the system as it allows me to better manage risk.

[Repulsion9513]

> The systems exist for a reason.

Because the rich like them.

> Losing my life's accumulation at age 60 to a greedy or unscrupulous character is not a risk I personally want to take.

So why is the answer "allow people to avoid their liabilities" instead of "don't give people liability to greedy or unscrupulous characters"?

> Personally I don't want to dismantle the system as it allows me to better manage risk.

Personally I don't want to dismantle the system as it favors me*

[bruce511]

>> Because the rich like them.

Because smart people like them. Those smart people use them to protect their own wealth, and often end up as advisors to rich people. They certainly work for rich people, yes, but they also work for average people who have accumulated enough that they want to reduce the risk of losing it.

>> So why is the answer "allow people to avoid their liabilities"

That's a somewhat inaccurate characterization of what they do. Firstly, liabilities don't exist in a vacuum. They exist because a creditor agrees to extend you credit under specific terms and conditions. That credit entails risk to the creditor, which they allow for, and charge an interest rate to cover. They go into this understanding the parameters of the loan, and the risks / rewards in making it.

Financial structures allow you to limit the boundaries of that transaction. They allow you to decide what is "in" and what is "out" of the transaction.

By contrast lumping all your assets and liabilities together makes you a juicy target for aforementioned unscrupulous characters.

>> instead of "don't give people liability to greedy or unscrupulous characters"?

Because you cannot control this.

If you have a bank loan, of any kind, you already breaking this rule. Banks are some of the worst offenders when it comes to bad creditor behavior. If you rent a building or premise from someone, and that someone sells to a new person, well, congratulations that new person just entered your personal or business life.

>> Personally I don't want to dismantle the system as it favors me*

Absolutely. Banks and corporations already have the deck stacked well in their favor. I'm a big fan of any part of the system that protects me from their predatory clutches.

[ryandrake]

> That's a somewhat inaccurate characterization of what they do. Firstly, liabilities don't exist in a vacuum. They exist because a creditor agrees to extend you credit under specific terms and conditions.

How does this relate to the actual article here, where somebody dies, a court determined that person X was personally responsible, and person X may or may not (we don't know) be using a trust, corporation, or other paper entity to shield himself from having to pay what he owes?

If that's just "the system" then we are saying the system is wrong. You're saying "smart people" use this system, and we are saying those smart people are the unscrupulous ones, taking advantage of the letter of the law to dodge what they owe. You shouldn't be able to use a structure of paperwork to avoid paying a judgment or fine that stems from wrongdoing. The corporate veil should be much more pierce-able than it apparently is.

[sanderjd]

Yep, you put this really well. A few commenters here are saying, "actually, if you're smart, you can figure out how to use this system to your advantage!". But we all know that. What some of us are saying is: Yes, anyone can do this, and that's bad.

[HeyLaughingBoy]

> The solution is to understand it, leverage it

Truer words were never spoken! The system exists, take advantage of it. Of course, when you do, don't tell anyone or you'll be accused of being "an asshole who is taking advantage of loopholes in the system" by those who don't understand that it isn't a loophole, it is the system!

[k8svet]

Yeah, how dare people be upset when you wave capital in their face and say "stop being poor and then you can take advantage of your peers like I do. It's okay, its The System". Come on.

[bruce511]

Firstly, as i mentioned, there are costs to reducing risk, so it's counter productive to educate poor people on how to structure assets when they have no assets.

So the idea of "stop being poor" is not in play. This doesn't make you rich, it is the reduction of risk that comes with being "rich". (For some definition of rich).

Secondly it's not "taking advantage" in a pejorative sense. It doesn't make other people poorer. It protects assets from creditors. Specifically assets that are not designated as collateral for specific credit.

It's better to think about this like insurance. You pay something to reduce risk. Taking out insurance isn't an affront to poor people, or a sign of excess capital.

Your comment though is a common reaction. There's this notion that making use of financial structures hurts the little guy. Or makes people poor. It does neither. Rather, I would consider that those who should use it, but don't, are either uneducated, or lazy, or irresponsible, or some combination of all 3. The education part can be fixed.

Clearly, just like insurance, to use it or not is a choice. Everyone is free to make their own choices, and determine their appetite for risk. Unfortunately financial management is not taught at school, and those who never learn it tend to be those who also "end up with nothing."

[thayne]

> Secondly it's not "taking advantage" in a pejorative sense. It doesn't make other people poorer.

Maybe not by itself. But by reducing risk, it also reduces accountability which allows people to take advantage of people in other, often illegal or unlawful ways, without any meaningful consequences when they get caught.

In the OP, the owner of the business has caused multiple deaths through negligence, but at least from the contents of that article there hasn't been any meaningful consequence.

[usefulcat]

> But by reducing risk, it also reduces accountability which allows people to take advantage of people in other, often illegal or unlawful ways, without any meaningful consequences when they get caught.

Is the above also an argument against insurance? If not, why not?

[rblatz]

Insurance companies payout, unlike people with assets structured in a way that protects them. Thus insurance companies are heavily incentivized to reduce the likelihood of having to pay out claims. They are experts at estimating risk and managing risk.

[int_19h]

In some places it is illegal to insure against liabilities stemming from criminal activity, for this exact reason.

[bruce511]

Structures don't make people do illegal things, people do illegal things.

Yes, "hiding your money" might seem like it reduces accountability, but the law has a solution to that (called prison).

Yes, as we all well know the law is imperfect, and administered by imperfect people.

None of this removes the legitimate value people get from using financial tools properly. Just because cars are used as getaway vehicles doesn't mean we should ban cars.

[sanderjd]

This might be a good argument if "this person did something really bad and escaped accountability by shielding their assets" were a crime that results in prison time. But it ain't!

[chgs]

> It doesn't make other people poorer. It protects assets from creditors.

By making those creditors poorer?

[bruce511]

Creditors tend (in my experience) to be corporations, not individuals. And having seen corporations behave very poorly to many, and given the resources they have to look after their own interests, I don't set out to arrange my finances to their best possible advantage, no.

I should point out that I've had creditors all my life. Landlords, Employees, Banks, Suppliers and so on. I've never stiffed any of them. Perhaps tat's because I remain in control of my own finances, and don't allow them to interfere in the business.

If you feel that protecting your creditors is in your personal interest, then by all means go for it.

[sanderjd]

You should re-read the article we're discussing. The people legally owed money that is shielded by the legal fictions we're discussions are often not corporations.

[chgs]

In This case it’s individuals owed the money and people like you using corporations to prevent their need to pay them.

[bruce511]

I'm not sure if uour answer is sarcastic, or serious. I suspect you got a downvote for that ambiguity.

Yes, I think there are people who ascribe negative connotations to making use of financial systems. Where I've encountered them, for the most part, they tend to be less-wealthy folk looking for some external reason for their perceived lack of success. To be honest I don't really care what they think.

I do care somewhat about making people's lives better, and some of that "better" means less risky. Having insurance doesn't make you a bad driver. Structuring your finances well doesn't make other people poor, and doesn't make you somehow riskier.

Yes there are those who infer that, and that's fine. I'm not spending my retirement worrying about folk who didn't agree with my life choices. I'll spend it spending the assets I have left.

[HeyLaughingBoy]

I was dead serious and I may have gotten a bit emotional because it's a pet peeve of mine.

I was the child of a single mother who didn't have a high school diploma. Somehow I managed to graduate high school without falling into crime as did so many of my classmates. Somehow I managed to get through college, barely able to pay for it and always wondering if this was the semester we wouldn't have enough money for what scholarships and loans/grants wouldn't cover. And yes, I willingly acknowledge that it was much easier to do that 30 years ago. The cost of education these days is nothing short of criminal.

But then I got into the workplace and I was surrounded by people who did nothing but make excuses for where they were in life.

I knew nothing about money other than I should have a bank account and save. So I got books and learned how to invest, how money worked to make more money, that there were better options than savings accounts, that I was better off buying a reliable used car instead of the most expensive thing I could afford, etc. I learned that by starting a simple Sole Proprietorship business, I could essentially be paid to learn because my business expenses would be tax deductible and I could make a little cash on the side.

I learned about systems and how to use them to my advantage. I also learned to keep my mouth shut because although anyone could learn the same things that I did, people would rather bitch about how everything is stacked against them and they could never get ahead.

<rant off>

[bruce511]

I understand and completely get where you are coming from. People seldom thank you for pointing out their poor life choices :)

Through your own efforts and experience you have acquired a useful block of knowledge. I encourage you to share it in cases where that knowledge can make a difference to someone else.

But yeah, in the wrong context it can hurt more than help.

[amrocha]

You do realize that what you're saying is that anyone who disagrees with you is poor and you don't listen to poor people right?

[bruce511]

I understand how you can read it that way. But that is not my intent, and clearly also not true.

There are plenty of rich people who are happy to keep everything in their own name, and just live with the risk. Most of those people turn out OK.

Some percentage make the news everyday as having "lost everything". Keeping everything together mean's it all stands and falls together. A bad decision in your business means the loss of your house.

So no, I'm not saying people who disagree with me are poor. I'm saying that rich people who disagree with me have a higher appetite for risk than I do. I'll work for 40 years, I'm not prepared to lose all that accumulation in year 39. Good structures remove that risk, which is something I'm happy to pay for.

Of course this hinges on your definition of rich. Perhaps you think a billion makes you rich. Or perhaps a million. Or perhaps 20k. It doesn't really matter. Whatever you have you can decide if you can afford to lose it all, or not.

Of course by the time you have a million you have a financial advisor, who will be advocating for the same risk reduction. Which is why this approach may seem tainted to you. I'll never have a million, which is why I'm not going to risk what I do accumulate, losing it would be painful.

[amrocha]

Here's your words:

"Yes, I think there are people who ascribe negative connotations to making use of financial systems. Where I've encountered them, for the most part, they tend to be less-wealthy folk looking for some external reason for their perceived lack of success. To be honest I don't really care what they think."

You literally said that if you think the financial system is unfair you're probably poor, and you don't care what they think.

[bruce511]

>> if you think the financial system is unfair

The financial system is certainly unfair. Life is unfair, from the moment you are born to the moment you die. This has nothing to do with "fairness". This has to do with personal financial management. There are rules to the game. Use them, don't use them, it's completely up to you.

If you want to change the rules to make them more fair, then by all means go for it. I'm not sure that any system you divide will ultimately be fair since it has to operate in an unfair world. The current system protects wealth at pretty much any scale. You are welcome to leave your wealth unprotected if you choose. That's your right.

[rblatz]

If you don’t have a million your probably have most of your wealth in your home (typically protected by homestead exemptions) or retirement accounts (IRAs up to 1 million and 401k have no limit). Then a simple cheap umbrella policy could fill any gaps.

[mindslight]

You're brushing off that these structures require an outsized level of wealth to pay the salaries of enough other people to make every legal entity a group project with diffuse responsibility. Without that, most judges are just going to say you're personally responsible for everything regardless of the legal structures you've set up. So no, it's not just a matter of us plebs learning how to use the system - it really is designed to privilege capital over individuals. For example see the blatant dynamic of the "Limited Partnership" predecessor to the LLC.

[bruce511]

The amount of wealth required and the actions of judges will depend greatly on your situation and the local legislation. Consult a good financial advisor for the best solution in your jurisdiction.

[mindslight]

I've read a bit about asset protection. The big problem I see is that how do you trust advice/strategies from any given advisor/attorneys will actually hold up, rather than simply being an expensive piece of paperwork that gets disregarded right as it's needed. Perhaps I'd feel differently if say I were in one of the few states that explicitly respected self settled asset protection trusts. But as things stand I'm somewhat salty that say even a straightforward LLC seemingly can't be relied upon to protect from the liability exposure of owning a rental property, when done by an individual. Meanwhile corpos have successfully convinced courts to create post-facto liability shields between business units that hadn't even been structured that way ahead of time.

[int_19h]

That in and of itself is not cheap.

[bruce511]

Cheap is in the eye of the beholder. Insurance is not cheap. It exists to mitigate risk. But in most places the overall cost is probably less than $1000 per year for the protection of the sorts of values most of us are likely to acquire.