Overview

In this episode of the Family Legacy Podcast, Michael Rutkowski and Kerry Guard dive into the importance of asset protection, explaining how it helps shield your wealth from legal risks, such as lawsuits and financial claims. They discuss practical strategies, including the use of specialized legal structures, to protect your assets while maintaining control. Whether you're a professional at higher risk of litigation or simply seeking peace of mind, this episode breaks down the essentials of safeguarding your future.

Episode Summary

The Growing Need for Asset Protection
Michael explains how the legal landscape has evolved, making asset protection increasingly important for individuals and families. With the U.S. being highly litigious, over 50% of people may face lawsuits in their lifetime. This makes protecting assets, such as homes and savings, essential for anyone who wants to avoid financial vulnerability.

Understanding Asset Protection Strategies
The discussion highlights how insurance alone may not be sufficient to cover liabilities, leaving personal assets exposed. Michael introduces asset protection strategies, such as creating separate legal entities to own assets, which can shield them from creditors and lawsuits. The episode focuses on striking a balance between ownership and control, ensuring that individuals can still use their assets while minimizing legal risks.

Irrevocable Asset Protection
Michael emphasizes the role of irrevocable legal structures in safeguarding wealth. He explains how appointing a third-party trustee to manage assets adds a layer of protection, making it difficult for creditors or lawsuits to target these assets. The discussion also touches on considerations for selecting a trustworthy and capable trustee.

Real-Life Scenarios and Benefits
Using practical examples, Michael demonstrates how asset protection strategies can secure homes and other valuable assets, even in high-risk situations like professional liability or car accidents. He explains how such strategies comply with asset protection laws and prevent individuals from losing wealth unnecessarily.

Planning for the Future
The episode concludes with a reminder that asset protection is not just for high-net-worth individuals but for anyone seeking financial security. Early planning and professional guidance can help families secure their wealth and navigate legal challenges effectively.

For assistance with asset protection or legal guidance, please contact Rutkowski Law Firm at 248-955-2842.

Transcript

Kerry Guard 0:00
Mike, welcome to the family legacy podcast, a podcast that goes beyond legal jargon and gets the root of how to ensure your past, present and future are protected. This episode is brought to you by their Toski law firm, Michigan's leading asset protection estate planning, Medicaid and Elder Law Firm. And here's our host, Michael welcome back. How's it going?

Michael Rutkowski 0:22
Thanks, Kerry, it's going great. How about yourself?

Kerry Guard 0:25
Very good. You have a good weekend.

Michael Rutkowski 0:27
I did. I did. I was in northern Michigan, just in soaking in all the color change. We did some apple orchard type stuff up there at Friskies near torch Lake, if you know where that is. And it was just an incredible weekend. It was 75 Sunny. You couldn't have, you couldn't have asked for a better weather. That's amazing.

Kerry Guard 0:47
That's amazing. Speaking of October and fall, we got somebody who wrote it to us about cider mills. This is so exciting. They said that their favorite place is Franklin and Goodison for apparently, they are known for their pistachio nut bread and donuts. There we go.

Michael Rutkowski 1:10
There. Have you been I have I have that's a little more southwest of me. I'm more of like, I like to go up to Blake's. But actually for me, I like getting up north, because up north is like 10 years ago, what 10 years ago down in, like, Southern, Southeast Michigan. Now it's just crazy. The weekends are just nuts down here. So it's, it's nice to get up there. It's a little bit more relaxed environment. Well,

Kerry Guard 1:33
that is awesome. Pistachio Nut Bread sounds amazing.

Speaker 1 1:38
So I'll pick some of that. Definitely get on up there. Yeah, make that happen, for

Michael Rutkowski 1:44
sure. But yeah, it looks like we got another solid week of weather here. So people just keep getting after those cider Mills, apple picking all the fall, things are still happening full swing.

Kerry Guard 1:55
I love it. I love it. If you're listening, thanks, Dwight, great to hear from you. Appreciate you chiming on in about your favorite cider mill and happy happy falling everyone. Let's get into it today. Michael around trusts one of the things we were talking a few weeks ago. I know we talk about this all the time. People must buy now, right?

Michael Rutkowski 2:18
Well, there's just, I think, I think what's, what's obvious here is there's so many different types. You know, like, we could probably go all day on, on, all the different types. Everyone's always like revocable living trust, but there's so many types. Sorry, to interrupt

Kerry Guard 2:30
so many types. No, no, this is good. So a few weeks ago we were talking, you brought up that one of the benefits of trusts is around protecting your assets in case you ever get sued. And I feel like, as everyday people, we're like, get sued, why would we have to worry about that? So talk to us a little bit about why we should worry about that, and then we'll get into how you can help us with that.

Michael Rutkowski 2:56
Yeah, you know, I think a good starting place is kind of looking back at like the last 30 to 50 years of where estate planning has gone. It always used to be about avoiding the probate court and getting your stuff to whoever you wanted, to your kids, your beneficiaries, as easy as possible. That's still a thing. But the reality is, there are so many more threats to an individual's estate these days that we need to make sure that there's something actually to avoid the probate court at the end. And so, you know, now people are living longer. So we've talked a ton about the high cost of long, long term care and how that could affect someone's estate taxes. You know, a big one we're going to dive into today is, is lawsuits, is just we live in the US in the most litigious country by like 1000 times the the likelihood of an individual getting in a lawsuit. I don't know. I don't know that we like think that this is going to happen, but we have like, over a 50% chance in our lifetime of being involved in some kind of lawsuit. Every state you're in, I know Michigan like driving around as you're looking at all the color change. What you're also noticing is all the Mike Morris billboards, right? All the, all the personal injury lawyers have billboards everywhere. You know, down south, it's Morgan and Morgan, Michigan. It's, it's Mike Morris law firm. And actually, Morgan and Morgan is trying to to, you know, get a little footprint here as well, because most car accidents, like over 90% of car accidents, are going to end up in some type of litigation, which is just crazy to think about. It's just crazy to think about. So like, what are our options when it comes to all that you don't you have, you have a couple. And I think it's a layered approach. I don't think it's a one or the other approach, but we all have insurance. So you know, just from looking at specifically the car aspect, we're not even getting into yet, like business owners and. What that looks like, or like high, high risk positions or jobs, you know, doctors, um, real estate development, that kind of stuff. Put that aside for just a second. But let's just talk about your every, everyday individual, you know, we have the option to up our insurance so that in the event we're in a car accident, we have higher, you know, higher coverage. Michigan just changed their law just recently on that, so you got to make sure you have adequate coverage. And then, you know, what can we do to protect our own assets, assets by way of, like, trust planning. You know, that's that's an option too. Does that all make sense? Yeah,

Kerry Guard 5:37
I'm just sort of baffled at what I'm still stuck on the 50% that sort of blows my mind. And two, it also is crazy that insurance doesn't sound like enough. Like, isn't that why we get insurance so that it just gets covered? Like, yeah, accidents happen, right? Yeah.

Michael Rutkowski 5:55
Great question. So there's two, two things that play into that. One is insurance companies never want to pay, right? So they're always looking for loopholes of, how do they not pay? Okay? I mean, you know, you look at the look down in Florida right now, with all the my, one of my buddies is going through this right now. He had a place down in Florida that got a lot of water damage as the result of the surges from the hurricanes. And he's like, it's just an absolute nightmare dealing with these insurance companies, because one's like, Oh, we don't, you don't have flood insurance. And then the other one's like, well, we don't cover mold, so you gotta make sure you get someone in there immediately to get the water out, and while you're waiting for the insurance company to pay, you got to get you got to pay out of pocket to get the water out, because if it's not out within like, 48 hours, you're going to have mold in your house which isn't covered under your insurance policy. So there's this game we all play with our insurance, of like, what's covered, what's not covered, and those kinds of things happen. I'm sure, if this was a call in show, we'd probably the phones would be blowing up with people who have experiences. This is a great idea, people who have experiences with insurance not covering what they thought it should cover. And so, okay, so what happens when insurance doesn't cover now, we look to our personal assets to to satisfy those debts. Same thing as if we had inadequate coverage. You're only covered to a certain amount. They're going to look for you personally. Let's just say, I'll throw out some round numbers. You're getting a horrific car accident. You have 500,000 of insurance, and the total bills like 750 well, who are they going to look to for that extra 250,000 you personally, the real thing. That

Kerry Guard 7:49
is a real thing. I have a lot of questions around, well, what if you don't have it? But that's not why we're here today. Because we're well, I mean, I guess that is a good question. So how can So, how can asset protection, and trusts help us with making sure that if we are on the live that 250 Yeah, we don't get hit with that bill.

Michael Rutkowski 8:10
So, so an option would be to limit the amount of assets you have to go after. Is essentially the thing, and it's either you don't have them to go after or, you know, you can use some kind of trust or other entity, you know, you could put in place an LLC or something, so that something else owns your assets and it's not used so they can't cover come after you personally. So Michigan just adopted a domestic asset protection statute, I would say, about 567, years ago. So we do a lot of asset protection here in Michigan. What that looks like is creating certain types of trusts that own your assets, so that you don't but you're still in control of the assets. You're still what's called the trustee of the trust. So although the trust owns the asset, you can maintain control. That's a big thing. When we caught when we're talking about asset protection planning, it's a balance of ownership and control. The ownership piece is really easy, the trust owns the asset, but then how much control we have over the assets dictates how protected they are, and there's a wide range of that, and it's just all kind of a risk analysis of yourself, of like, how likely am I to be sued? You know, if we're working with the doctor, for instance, we want to let them have less control of their assets. And what does that mean? Sometimes that means appointing a third party trustee, so someone other than yourself, is the trustee of the trust, and you have to work with them in order to get your assets back or to use them.

Kerry Guard 9:48
How? How connected to that person do you need to be or not be? Like, is there? Obviously you probably don't want to give to your spouse. Yeah, in some regards. So

Michael Rutkowski 10:00
that's a that's a great point you make up, or that you're saying. So there's something called a slat Trust, which is a spousal lifetime access Trust, which this is used more in the tax planning arena, but your spouse actually can have access to the assets. So it's a great planning tool if we have to do tax planning for a married couple. But when it comes to lawsuit, asset protection, we can have an interested party, be that, be that trustee, so a spouse can't do it, can't have your kids do it. You could probably have, like a sibling do it, or like a good like a business partner. Some banks will do it, fiduciaries, like CPAs, attorneys. You know, you can, you can find someone in your circle to have act as that third party trustee. But if the sole focus of what we're doing is lawsuit asset protection, you want to have a solid third party trustee. Who

Kerry Guard 10:54
would you recommend for that? In particular, you said you could have all these people, but like, ideally, who would you who every

Michael Rutkowski 11:00
situation is different. You know, we look at family dynamics. We look at your professionals and those relationships. You know, a financial advisor might be great if you've been working with them for 20 years, but if it's someone you just hired six months ago, you know, you might want to let that relationship develop a little bit. But you know, that's something that as an attorney, we're coaching our clients through those decisions. Keep in mind, though, that this has to be an irrevocable trust, okay? So it's an irrevocable trust versus the revocable trust that we talk a lot about, which is mainly probate avoidance planning and making sure your your kids or beneficiaries get your assets the way you want them too. So it's gotta be an irrevocable trust. But usually this is, this is a layering approach where, like we've done the foundational estate plan for a family, and now we need to layer on asset protection. And what does that look like? And so we walk the family through options when it comes to asset protection planning.

Kerry Guard 11:58
Okay, well, let's start to understand that a bit in terms of the difference between an estate plan versus the asset protection. So it sounds like the asset protection is that layer between you and your assets, so that if somebody was coming after you for a lawsuit, they couldn't touch them. Yep, great. So how do you so the beneficiary is a piece of that, right? Because it's no longer yours. You're no longer in control of it. You're still tied to this just boggles my brain, because, like, we're still technically tied to the assets. Like somebody, a lawyer, could point to that and say, they have this asset, they have this estate plan sitting. So

Michael Rutkowski 12:36
Kerry, let's, let's, let's throw a hypothetical out there so people can understand I'm doing planning. I'm doing planning for you. And you're a doctor today, okay? And so you have your house that you might be sitting in right now, and you're like, I'm really concerned. I want to make sure, you know, I have a daughter who wants my house. I want to make sure that if I ever gotten a lawsuit, that can never touch my house. And so we'd say, okay, that makes sense. Let's maybe do an asset protection trust where you're going to appoint you. I don't even know if you have a sister or not, but again, this is a hypothetical. You're perfect. Your sister is your trustee of this trust. It's an irrevocable trust to hold your house, to protect it. Okay, that doesn't mean that you can't live in it, and it doesn't also mean that you can't sell it. If you wanted to, you would just need your sister's help, because now your sister is the trustee. So when we go to sign up a realtor to come and sell your home, your sister's going to sign as trustee of the trust that owns your home. Does that make sense? You're still technically the grand tour, fancy term for whose asset was it that went into the trust? Who created the trust? It's your stuff that went in it, and it's your stuff still. So if you wanted to sell the home to either buy a lot of times, we have families who want to downsize, right? They're they're aging, and they want to downsize, but it may be, you just want to move to a different city. Then we would buy the new so then your sister sells the home for you. They write you a check in the name of the trust. It goes into a trust bank account. And now we go looking for a new house, and then we go to buy the new house. Your sister's going to sign the check buying the new buying the new house for you. So

Kerry Guard 14:28
the transaction just goes between the the buyer and the trust. Yes, it doesn't get passed through you at all.

Michael Rutkowski 14:36
At all. The transaction, you're selling your home out of the trust, and you're buying your new home in the trust.

Kerry Guard 14:44
Got it. Okay, so how does this protect you? So it protects you because none of it's in your name, and it's not, it's no longer technically, quote, unquote, yours Correct? You're really all it is. You

Michael Rutkowski 14:55
don't, you don't own it. The trust does, so a separate thing. Entity owns, owns the asset, which is your home, and then who's who has the most control of it. You couldn't just go sell it yourself without your sister's signature. If your sister said, No, you're not selling your house. So there are ways, there are ways to replace the trustee. So if your sister's just being a sister, sometimes you could replace her with someone else. That's always an option. You know, if your sister won't let you sell the house, you could do that. Okay?

Kerry Guard 15:37
That, yeah, I mean, that would be kind of necessary, right? Because, yeah, if some, if you're not getting a lot, well, we talked, we talked about this in previous episode around like beneficiaries, and how to find them, and then how to, how to potentially move them around if you need to. So I'll link to that episode down here in the comments so people can check that out. But it so let's say you get sued for whatever reason. You have this $250,000 bill on on the line, as we mentioned before, using the previous scenario. So what happens? They cut, you know, they sue you. They come after you don't actually have it. Because

Michael Rutkowski 16:12
it's great to walk through. Yep, it's great to walk through. What how this actually would play out? So that person who you got in the car accident with, with the family, or the person would hire an attorney to to get as much money as they possibly can. That's what plaintiff attorneys do. And so they're going to request a list of your assets. Okay, you during that process, you have to let them know all of your assets, and they're going to see that there is an asset owned in an irrevocable trust. And so the primary focus of asset protection planning is to make it as difficult as possible for those individuals to go after those assets. So what's going to happen in reality is they're going to get a list of the assets and they're going to say, Okay, it's $750,000 worth of damages in this lawsuit, 500 is going to be satisfied by the insurance company. So, okay, got 500 done? Now there's an extra 250,000 out there. Can we go after the person personally for the 250 now you might have a checking account that's got like, three to five grand in it, they could probably tap into that. But then they're going to see the rest of the assets are owned by this irrevocable asset protection trust, and they're going to be like, Well, man, that sucks. So then they're going to look into, okay, I want a copy of the trust. I want to see how you're using it. I want to see if it actually complies with the asset protection statute. And if you were dotting your I's and crossing your T's, they're going to be like, Well, looks like we're just going to go after that 500,000 because got it. There's no way. There's no way. Now, if you're not following the don't have it, you don't have it. Yeah, if you're not following the rules in your irrevocable trust, meaning, let's say you set it up, but then you're doing a lot of things in it, or something. A really good attorney could maybe unwind that irrevocable trust, but maybe that's a whole nother episode, but, but the reality, yeah, yeah, until next time, they will see the list of all the assets and how it's all titled, who owns what, and they're going to be like, well, it looks like, let's just take our 500,000 and call it a day.

Kerry Guard 18:29
Okay. Okay, so it really can protect you. Yeah, you really,

Michael Rutkowski 18:33
like, it's not a hide the ball strategy, like you'd show them the trust. They get a copy of it. They know exactly what's in it and when it was created, but at the end of the day, they're going to be like, that's that complies with, you know, the Michigan asset protection statutes, and we can't touch it.

Kerry Guard 18:50
And this is only for Michigan, or do other states have

Michael Rutkowski 18:53
states. It's for states that recognize asset protection. So there's a lot of them I can off hand list all the ones. I know Michigan is one. I know Colorado is not one, but yeah, you'd want to create a trust. And so in saying that you can still live in Colorado and create a Michigan trust, we do that for families all the time. You don't have to live in the state in which you create the trust. If you want asset protection, you just have to look to another state.

Kerry Guard 19:23
This is opening up a whole can of worms, but I have to start the question and folks who might need to finish it later. But if you have an Asset Protection Plan Trust, you have an asset if you have an asset protection trust in Michigan. Then, if you get sued in Colorado because you're because your trust is in Michigan, it's secure. It's safe from that, yep,

Michael Rutkowski 19:55
wow, you can, you can have a trust in another state. Eight. So it's another jurisdiction, and here's going to blow your mind even more, so you can also one. One layer further of this asset protection is offshore trust, having having trust in completely different countries to to protect your assets.

Kerry Guard 20:22
Okay, we're going to follow up on that. We got two episodes coming out of this one. Folks, stay tuned. I'm stoked, Michael. I always appreciate your insight, and I learned so much. So thank you for that. Before we go, we got we got to go. Folks, I'm sorry we're at time here before we go, though, Michael's got seven days coming up. Where do you most looking forward to as we roll into the weekend here?

Michael Rutkowski 20:45
Oh, yeah, here's what's going on, but you can't tell anyone. So we're taking my mother in law through the lions game on Sunday. She's been dying to go and her birth for her birthday, we're taking her to the lions game, but I'm hoping this will air afterwards, so we should be

Kerry Guard 20:59
okay. Oh, it will. It will. And I'm going to follow up with you to hear how that went

Michael Rutkowski 21:03
last weekend. Big win last weekend. We beat the Vikings. There five and, oh, it was a huge one.

Kerry Guard 21:10
Oh, man, that's going to be awesome. And it's also

Michael Rutkowski 21:13
my daughter's it's my daughter's 11th birthday. So we're having like 17 girls sleep over on Friday night. So if I survive that, I'll be going through the lions game on Sunday. Well,

Kerry Guard 21:27
we have a lot to look forward to next Tuesday. So hang on to your hats, everybody. It's that's, yeah, we're going to follow up on all of the things. It's going to be great. Oh so good. Thank you for listening. If you like this episode, please like, subscribe and share this episode was brought to you by the ratoski Law Firm, Michigan's leading asset protection estate planning, Medicaid and Elder Law Firm. And if you would like help in creating a asset protection trust in Michigan, no less, please give us a call. 248-955-2842, again, that's 248955284, 89552842, thank you all so much. Thank you, Michael, everyone have a great week.