#614 How Lawsuits Can Take Away Your Home (And How to Stop It!)

If you got sued tomorrow, could you lose your home? In this episode of the Main Street Business Podcast, Mark J. Kohler and Mat Sorensen break down the real risks to your home equity — and the smart strategies you can use right now to protect it before it’s too late. From homestead exemptions to equity stripping, this is essential knowledge every homeowner and investor needs to understand.

We dive into how different states protect your home, when creditors can (and can’t) touch your equity, and how tools like HELOCs, retirement accounts, and domestic asset protection trusts can create powerful layers of defense. You’ll also learn the common mistakes people make — like relying too heavily on umbrella insurance or transferring assets incorrectly — and how to avoid them.

If you're serious about protecting your wealth, minimizing risk, and building a solid financial foundation, this episode gives you a practical roadmap to do it right. Make sure to subscribe, like, and share this with someone who needs to safeguard their assets!

You'll learn:

• How lawsuits can impact your home equity — and when your house is actually at risk
• What the homestead exemption is and how it protects you (state-by-state differences)
• When and how creditors can force the sale of your home
• The strategy behind “equity stripping” and how it can reduce your exposure
• How HELOCs and liens can be used as a defensive asset protection tool
• Where to safely move equity so it’s harder for creditors to reach
• The pros and cons of domestic asset protection trusts vs. offshore trusts
• Why umbrella insurance may not protect you the way you think
• How to structure LLCs and entities to contain liability and protect personal assets
• Common asset protection mistakes that could cost you everything

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Transcript

The Fear Of Losing Your Home

SPEAKER_02 0:00

If I have a lawsuit in my life, am I gonna be forced to sell my home? Well, one way to avoid that is to strip out the equity in your home. This puts a lien on title and it shows debt against the asset, which means a creditor can't get at that equity in your home anymore.

SPEAKER_00 0:14

If I had Dave Ramsey over here, he'd be like, hell no, because what's one of his primary strategies he teaches is pay off your home mortgage. Okay, now I'm not paying interest anywhere. That's great. And if someone sues me, is that equity at risk? Welcome everybody to the Main Street Business Podcast. My name is Mark Kohler. I'm here with my incredible partner, Matt Sorensen, talking about issues that affect everyday Americans in the tax and legal area. And we love talking business because if you're if you own a small business or you invest in real estate, you're gonna have to be somewhat of an expert with tax and legal. You are the captain of your ship. You got to be aware of issues so you can better direct your professionals. Today's topic protecting the equity in your home. Oof, this is a big one. Sometimes our home equity is our most valuable asset. And it's scary. A lot of people are nervous about it.

SPEAKER_02 1:14

Yeah, and we want to know like, if I have a lawsuit in my life, is my equity in my home at risk? Am I going to be forced to sell my home? Could a court force me to sell my home? We definitely don't want to be in that situation. And because real estate is appreciated over time, many of us have built wealth. We've been paying down our mortgage, we've had some benefit of appreciation over time. We're talking hundreds of thousands, if not millions of dollars of home equity that could be on the line for us. So, how do we make sure we protect that and keep that? That's what we're gonna hit in today's podcast.

Homestead Exemptions By State

SPEAKER_00 1:48

Yeah. And now here's an initial disclaimer. And it's not the one you think is gonna, I'm gonna say. Here's the disclaimer. There are a lot of strategies, there's a lot of options. They're gonna be based on your state, based on how much equity you have, what type of exposure are you creating in your life? So we're we're we're gonna give you the strat. I've got six that I list in a chapter in my book on this topic, but there's more than that. And there's ones that sometimes people don't even think about that are easy, low-hanging fruit, just to eliminate the risk is better than protecting, right? So let's just go for it, man. I mean, we could I I I don't know. I think the homestead exemption comes first. It really does. I think I from there you go down, and some people are like, what do you mean? Bankruptcy and homestead exemption? No, it's it's a whole other issue. How would you kind of would you agree? Yeah. Can we open the topic there?

SPEAKER_02 2:45

Yeah, I think that's uh number one to talk about because this is one in many states that's automatic. And this varies by state. There's 50 different answers to this, but most states, 40 plus, have something called a homestead exemption that under law in your state says, hey, a certain amount of equity is protected. You could a creditor cannot sue you and chase after a certain amount of equity in your home. For example, I'm in Arizona. The homestead exemption in Arizona says if you're an Arizona resident, your personal residence, your home, is protected up to$400,000 of equity. So if I got a house worth a million bucks and I got a$700,000 mortgage on it, I'm fully protected. A creditor could not force me to sell that or go after that equity in my home. I'm protected up to that$400K.

SPEAKER_00 3:34

Now, some states, but Yeah, and Matt, I think you said something important before you go on further. We need to tell people, and maybe we're making too many assumptions. What is the equity we're worried about? We are the worried about the equity between the fair market value, maybe? No? What would you net if you had to sell your home? So you could even take 10% off for selling costs. So if your home is worth a million dollars after realtor and closing costs and blah, blah, blah, you may only have$950,000 of net proceeds. Then you subtract any mortgages, uh, liens, uh, second mortgages. That's your equity. And if you got into a bad enough lawsuit and you ran over one of my kids, I might sue you and say, I want the equity in your home. Well, I can't get in front of the bank. The bank's gonna get their money. They loaned you money to buy that home. They're first. So that equity is what we're after. And I like your example, Matt. Let's say you've got, what did you say? Four million dollar house.

SPEAKER_02 4:37

Yeah, million-dollar house,$700,000 mortgage. So I got$300K of equity.

SPEAKER_00 4:44

And the exemption in Arizona is$400. So if you got into a lawsuit, the people would have to go after your insurance, go after your car, go after other assets to get what you pay you owe them in a lawsuit. So your home is untouchable in that example. So I'm gonna add a piece here, and Matt, you said it too. You said you it's automatic. Well, an example of a state that's not is Massachusetts. There's kind of a few big cities in Massachusetts. Let's think of Boston. So you might want to take note. If you live in Massachusetts, you can have up to$500,000 of exempted equity in your home, but you have to file and declare it. So you're gonna record something on your deed or your title or with the county that you're in and say, hey, I want this homestead exemption. And if you don't file for it and you have a lawsuit, you can't go backdate that sort of thing. So you can you gotta know what the rules are in your state.

SPEAKER_02 5:48

Yeah, and that might the title company may have done that when you bought that home. They may have known, oh, this is your residence. Some of them are automatically doing that, but don't make that assumption. Another state is Texas. Texas actually has an unlimited homestead exemption. You could have a hundred million dollar home there. I don't know, it might be a record. 50 million in Texas. There's definitely Jerry Jones's house, it's definitely worth 50 million. Okay. All right. You got a$50 million home in Texas. You that whole thing is exempt. But, and no creditor can go any of that,$50 million of equity, totally protected, but you must file a homestead declaration in Texas to claim that. Um, so this is a good area in your state. Look up where you're at and figure out do I need to file something or not? If I did, is it already done, or is it something I need to get done? This would be something on the county records you would see either in the deed or as a separate filing when you acquired that property.

Equity Stripping And Where Cash Goes

SPEAKER_00 6:42

Okay. Now let's move to step two. You look and you've got more equity than the homestead exemption would protect. Okay. What else you got, guys? Step two. And so we with our attorneys, we have 12 attorneys in our office doing consults every day, and they do an asset protection and privacy uh consult where we give you a score. We're like, here's your exposure, here's some things you might want to consider. So we would identify this with you, but um, you do some self-evaluation and you go, California. And that exemption could be anywhere from 300 to 600,000, and also you have to file to get it. But what is one of the most valuable assets for residents of California? Their home. They bought a home for 500 grand, now it's worth 2 million. And so they're like, holy crap, no exemption is gonna protect all that. So then we go into a second type of strategy. Oh boy, and this is where it gets to be a grab bag because it depends on your state and what you're up to. I I I'm gonna say equity stripping, do you think, Matt? I mean, I don't know. You like that one?

SPEAKER_02 7:51

Yeah, definitely equity stripping. Um, what we're talking about there is let's hit that example. Mark says you got a two-a house worth two million, you bought it for 500, and let let's say you just say the mortgage is 500. So you got one and a half million of equity, all right, in that home. Okay, so I got some homestead exemption protection there, but not enough to cover it, the whole equity. Um, so what was the homestead exemption in California?

SPEAKER_00 8:17

Let's say it's you the max is 600. It's gonna depend on your age to get there. But let's say it's 600.

SPEAKER_02 8:23

Okay, so let's say I got a 500k mortgage still left on it, 600k homestead, so I'm up to 1.1 million. So I got$900,000 of equity at risk. Well, one way to to to um avoid that is to strip out the equity in your home. Get the equity out. Now there's a there's a cascading set of consequences to this that you got to think through. Because if I have a lien on the property for a second mortgage and I do a cash-out refinance, let's say, um, well, now I don't have equity left in the home. Let's say that I took you know that$900,000 out in a home equity line of credit. Okay, well, where's that$900K going? Is it going to a bank account or investment account that could get garnished? Uh, that's not that great. Maybe I max out retirement account contributions where the money's protected. So they can't come into retirement account. I'm deploying that money, maxing out retirement contributions. Okay, that's asset protected. So that the thing you got to know when you do equity stripping is this puts a lien on title and it shows debt against the asset, which means a creditor can't get of that equity in your home anymore. But where did that money actually go? We want to make sure that money is gonna flow somewhere where it's gonna be protected from the creditor and not, frankly, easier for them to get if you just put it in a brokerage account or a savings account.

SPEAKER_00 9:43

And boy, and I know we're opening up a cans of worms because if I had Dave Ramsey over here, he'd be like, hell no. Because what's one of his primary strategies he teaches is pay off your home, your home mortgage. You want to pay off your home so that you've got this asset that is not draining interest. He hates paying interest to banks. I get it. So there's a you you've got a pro and a con here that you've got to uh look at in your personal life and go, I'm using that equity somewhere else to get me a better return than the cost of the interest. And it's it's it's creating a barrier from someone suing me and taking away my home equity. If I pay off the home, okay, now I'm not paying interest anywhere, that's great. And if someone sues me, is that equity at risk? So if I had a client living in Texas, I'd say, okay, pay off the equity in your home. No one can touch it in a lawsuit, but you got a million dollars sitting there. It's not making you anything. You're not paying interest on it, but it's not making you money either. Now that's a whole other conversation, but this is what you've got to debate when you get into this equity stripping and paying interest.

SPEAKER_02 11:04

Yeah, what it well, you've got to think of the equity in your home can be a liability and a risk in the sense that, ooh, I could I could lose that equity if I have some lawsuit or some unfortunate event. But it can also be a tool that you can deploy into other investments. Maybe this is starting a business. Maybe this is an investment where the return is gonna be in excess of the cost of the debt. And if the return is in excess of the cost of the debt, I'm I'm I'm winning on paper by building assets, even though I have a liability on my house. But I'm also that asset might be more creditor protected than the actual equity just sitting there in excess of the homestead exemption in my state. Now, again, you could be Texas or Florida or these states that have unlimited where it's not necessarily we're worried about the asset protection as much anymore, and stripping out the equity doesn't give you any value. But in most states, I'll be honest, it's not unlimited. There's only like five or six states, Florida and Texas being big ones, Kansas, Iowa, Oklahoma, those are the other ones where it is unlimited. But most states, you're gonna have a limit there. So you're gonna have some, as your property appreciates and you're paying down a mortgage, you're gonna have some equity eventually that that's gonna be at risk.

SPEAKER_00 12:20

Yeah. Now, it needs to be mentioned, because any of you that are asset protection geeks and you're listening to us thinking, what are these guys got? You're gonna go hold it. I can set up a Wyoming LLC that no one knows I own, no one knows I set up, and I can lean my house with a loan, a mortgage, and to the world, it looks like I've stripped all my equity out when in reality it's not costing me anything, and it's smoke and mirrors and blah, blah, blah. Yes, you can do that. But I will just say if the lawsuit progresses to discovery or really much at all, and a judge finds out that's what's going on, that strategy is gone. Yeah. So it does work from a presentation standpoint. If a potential plaintiff was gonna search for your asset mix and what you might be worth, they might see the second mortgage and back off. But at the same token, they might smell a weasel too.

SPEAKER_02 13:22

Yeah, it's kind of like um trying to uh rob the convenience store with a with a fake gun.

SPEAKER_01 13:28

Like, you know, it's like it might work, but if someone calls your bluff, you're toast.

unknown 13:35

Okay.

SPEAKER_01 13:36

And you're still going to jail, whether it was a fake one or a real one. So it's still armed robbery, whether it was a squirt gun painted black or not.

SPEAKER_02 13:47

So just be careful and make sure that little orange thing at the tip, you gotta like paint that black too. That's a that's a big you know tip-off that it's not really always, you know, just a little tip-off there for for the criminals. All right. No, but but here's another one on that same topic. I gotta I I have a serious point too, Mark. Okay. Is um what I have seen clients do, and I do like this strategy and given this advice to many clients for yours, is just get a home equity line of credit, which will cost you typically, it could be an annual fee, but don't draw on it. Because when a bank gives you a home equity line of credit, they throw a lien on your property up to the maximum amount you can draw. And even if you don't draw on it, that lien is still sitting on your title of the property. Let's say you got a line of credit up to 500K. Well, they're gonna drop a lien on your property up to 500K. And so, but don't you don't have to draw on it necessarily where you're incurring the cost of the debt. You might have a$100,$250, or whatever fee each year to have access to the line of credit, whether you draw on it or not. But that could be another way of getting a legit lien on title that can dissuade a potential plaintiff from thinking there's equity there, even though you haven't drawn on it.

SPEAKER_00 14:56

And of course, some asset protection or sorry, some plaintiff lawyer listening today uh is saying, yeah, yeah, yeah. You don't draw on it, it's as good as nothing. You know, it's worth it's not worth it.

SPEAKER_02 15:08

Yeah, and I get that. It's the same smoke and ears thing.

Tenancy By The Entirety Rules

SPEAKER_00 15:10

Yeah, it's gonna have a much more legitimate look and help. Okay, now step option three. Now I like this one. This is a good one. And it starts, we need to start also to talk about what risk you're creating. Um, and the third one is tenancy by the entirety. And I can bet 95 out of 100 listeners have never heard of this because it's it's pretty unique. But what tenancy by the entirety is, and it's on the books in every state, whether a state slides by it or not, is tenancy by the entirety says this. Um, I'll talk about me and Patty. So Patty and I own a home, we've got some home equity, I'm driving down the road, texting and driving, heaven forbid, of course, which I never do. And I'm texting and driving, I get in an accident and I really hurt someone, heaven forbid. Triple knock on window. So, but let's say I do that, and someone sues me for killing someone, texting and driving. The lawsuit is against me. Well, tenancy by the entirety says, plaintiff, you can't go after this house and take away the house Patty lives in as well. Because they have tenancy by entirety. They own that house together. So you can't just go rip that equity out, even though Mark was the bozo and he's the one that's on the lawsuit. It's you you can't hurt his spouse by taking that equity. Well, makes logical sense. Only 25 states abide by that. 25 states, ironically, split down the middle, give full recognition to that law. The other 25 have some variation of it. Not it could be some protected even after divorce, some protected even after the death. So if I died or we got divorced, they still can't touch it. Others have variations of it or no protection at all. So, in an analysis, we would look at your home equity. If you don't have full protection with homestead, what about stripping equity? Tenancy by the entirety. Massachusetts, remember, we used that as an example earlier, has a$500,000 homestead exemption, but a full recognition of tenancy by the entirety. So if you're married, it's as good as living in Texas. As long as you both don't get in a lawsuit for equal liability.

SPEAKER_02 17:41

Yeah. Now this sometimes poses an issue because you're like, well, we have a joint revocable living trust. I want to make sure that my trust owns the property so it's properly coordinated for estate planning purposes. So many times the asset protection value doesn't always align with the estate plan trust avoid probate line of thought. So just be in sometimes the law is not always, you know, copacetic. There can be, it can be in conflict here. Um can I say something on that, Matt, too?

SPEAKER_00 18:13

Yeah. Like, so in fact, I would even say privacy too, because in Hawaii, Hawaii has tenancy by the entirety. And in their law, it says if you have a revocable living trust, that's okay. But when you record title, you have to say, we are going to hold title in our revocable living trust, but we are also married. Here's our names, and we want tenancy by the entirety. So they kind of you can get both estate planning and the protection, but privacy out the window. So when some clients are like, well, I don't want to have anybody know they own we own this house. We're gonna use a really uh innocuous name of our trust and have a Wyoming LLC be the trustee. Uh, but we also want Tennessee by the entirety. Well, you're not gonna be able to have your cake and eat it too sometimes. So I like your point, Matt. Very you've got to look at these competing issues.

SPEAKER_02 19:10

Yeah, and I think another point on this, just make sure everybody's understanding tendency by the entirety, is Mark gave the example of texting and driving, right? That's one person responsible. There's a lawsuit against just that one person that's texting and driving. But let's say that this is a joint credit card or loan that you and your spouse both signed on, and the judgment is against both of you. Okay, well, that is gonna be, even if you have tenancy by the entirety, it's not gonna stop that. Tendency by the entirety just stops if it's one of this of the spouse, one spouse has a liability or a lawsuit against them from getting in an asset that is held by tenancy by the entirety by by a married couple. So just know that's what it's protecting is that individual liability of one of the two parties. Um, but if you're both on the hook for a liability or lawsuit, the loan, the credit card, whatever you're both had joint um reliability for, it's not gonna help you there. Yeah.

SPEAKER_00 20:05

Now I love it. Great point, man. Now, before we get to why don't we just try to limit our risk, then try to create more barriers. You know what I mean? Some of these strategies are I'm gonna throw caution to the wind. How can I protect my equity? Maybe we should talk about not being a dumbass in the first place and not texting and driving, then you don't even have to worry about this as an example. But that's a bigger challenge, though.

SPEAKER_02 20:31

That's a bigger challenge.

SPEAKER_00 20:32

Yeah, yeah.

SPEAKER_02 20:34

Unless you have like uh unless you have like some uh training program or something for this. Uh I don't know what you've got for that. How to not be a dumbass.

Domestic Asset Protection Trusts

SPEAKER_00 20:43

Yeah, how to not be dumb. We we've got a class for you. Um now, number four. I'm gonna throw out a number four as another barrier, is called the domestic asset protection trust. Good one. These are recognized in not all states again, buckle up, 21 states. And their laws vary a lot. Uh it maybe it helps with property in that state, it may help with property in another state, who has to be the trustee, blah, blah, blah. So there's going to be a little bit of analysis there on a adapt law based on your state. But this is a revocable trust on top of is a layer or between your revocable living trust and your home. And these domestic asset protection trusts may allow you to be the trustee, sell your home by another one, things like that. But this is a special trust that protects an asset and it's got to be in place, property transferred, and sometimes seasoned. Some states want to see that trust in place six months, a year, or more before that wall goes up. Um, a lot there. Matt, how would you unpack it?

SPEAKER_02 21:52

And yeah, I think, you know, you might have heard of these irrevocable trusts to protect assets from creditors or offshore trusts. Those are like we do not like those. We've never seen clients win with those. We've seen way more problems than benefits from those of clients that have used those. Very limited situations where we would ever be like recommend that. But what we do like is these domestic asset protection trusts because they're based on U.S. law. And what if let's be honest, if you get sued, you have assets in the U.S., you're gonna be dealing with U.S. court systems. So we want U.S. law on our side. Well, these 20 plus states that you know that are out there, they have a specific law that says creditors can't touch assets in this trust. Period. Like you have the law in the books. You're not relying on some case, or you're not trying to, you know, plead poverty and you're gonna put me on the streets. Like you have a law that says what's in here you can't touch. That's a pretty powerful thing. I'll just give an example. We had a client in Nevada that had a domestic asset protection trust that we'd set up. He had a lawsuit against him personally. They were trying to garnish bank accounts of his. And this is a well, it was Wells Fargo, actually, the bank, but the bank account was in the name of the trust. I we literally had to get involved. And the bank was like, wait, can we let this money go or not? It's in the name of this. And we're like, this is a domestic asset protection trust. You you cannot execute this garnishment order that was against this person in their individual name. So what happened is the bank basically rejected this garnishment order, and that client's bank account sat there with a big chunk of cash in this domestic asset protection trust. But whether it's a bank account with a bunch of cash sitting in it, a securities account, equity in your home, these assets can be protected in these domestic asset protection trusts. Now, they are a little more complex and they're not for everyone. The Revoco Living Trust is like, that's for everyone. Everyone, frankly, needs that. But if you're someone that does have more liability, homestead exemption isn't enough, you can't contain your asset protection, your risks, and can't protect your assets from some of these other more easier strategies, frankly, then we can look to the domestic asset protection trust as your next option.

SPEAKER_00 24:07

Yeah, great, great points. All right. Now I'm gonna now we're digging the bottom of the barrel uh at this time. I've got one.

SPEAKER_02 24:13

I've got one.

SPEAKER_00 24:14

Okay. Well, I'm is it my turn or yours? You call it if you want it. You want it? I mean, I'll take it. Okay. Okay. I got one too.

SPEAKER_02 24:21

When you say you're at the bottom of the barrel, I thought that was like kind of an invitation that like. Oh, oh, no, I've said two more. But I'm you know, I'm just saying they're not as good.

SPEAKER_00 24:30

But you can you I want to hear yours, and maybe one of mine.

SPEAKER_02 24:32

Well, I know we've kind of we've danced around this here for a second.

Umbrella Insurance Reality Check

SPEAKER_00 24:36

Oh, is this more of your creating less risk? Yes. Okay, let me let's stay on the barrier for a moment. Okay, all right. Umbrella insurance. Ooh, okay. Okay, and still I call it kind of bottom of the barrel because guess why it's so cheap, people. You get what you pay for. So umbrella insurance, when you look and you can get past the first four pages on Google, you find out that umbrella insurance doesn't pay out very, very often at all. And it's because it only comes into effect after about 30 pages of we're not liable for this, we're not gonna pay if this happens. And it's after your regular insurance pays out its maximum amount. It's just an extra barrier. Now, is it bad? No. Do I still buy it? Yes. But people, you cannot hang your hat on this as the get-all, end-all, I'll just buy umbrella insurance and I'm done. Hell no. So be careful with it. I I I don't. You do you have umbrella insurance?

SPEAKER_02 25:40

No, no, I don't buy it. And I've just, I have I can't even think of a client that's made a claim on it. I had a client think he was going to make a claim on it, and then real and I've talked to many clients of like who would totally didn't understand what it is. Um, all's umbrella insurance is it's excess insurance. So when they when an insurance company writes an umbrella policy, they ask and they want to know what existing insurance policy do you have? Oh, you have an auto policy, oh, you have a landlord policy for that rental property, oh, you got a policy on your home. Okay, great. The only way this umbrella policy pays is if one of those policies pays out on a claim and is maxed out. Only after that, when these underlying policies accept coverage and pays out in its max, does the umbrella policy come in and provide any coverage? So that's why I like to call it more of excess insurance coverage. Because I've had clients, I had a real estate investor client that had a rental property with uh insurance, luckily owned this in his LLC. The tenant had like a bunch of steps up to the front door. The tenant slipped and fell, had pretty significant injuries coming into the home, sued my client. What did my client do? Landlord tenant policy goes to try and make a claim on it, right? What does the insurance company do? Deny. And they denied it because they're like, yeah, there were eight steps to the front door. You should you had a handrail on one side, but not on the other. Code requires you to have a handrail on both sides because it's over a certain amount of steps. I don't remember the exact details. And they basically denied the coverage on them. It's like, we're not paying a penny on this. Well, when that happens and they don't cover, the umbrella's not gonna cover either. Okay. So now you have that liability and risk. So that's so just be careful on the umbrella. Um I like how you said the reason it's so cheap is because it doesn't provide much value.

SPEAKER_00 27:27

Yeah. Well, and I feel like I gotta defend myself now. Patty and I really debated this. Did you buy an umbrella policy? Yeah, I pay for it, damn it. So let me tell you why. Like, okay, where I liked the umbrella is it it remember it's excess, and so it covered, we put it over our, it it covered our boat. So if we were out on the lake and uninsured motorists, so other people that might hit us in a car, other people on the lake. And a lot of times you don't have as much coverage in those situations. So we had it, it was over our boat, over our side-by-side. It covered four-wheelers and things that a homestead exemption wouldn't cover. And then we and an uninsured motorists, teenage drivers. It was always like those little things where I was like, okay. But anyway, I I go Vegas and I'll I'll put I hit it big on roulette the other day. I mean, it was awesome. I I I was I put down two uh five dollar chips on uh one number and hit, and I, you know, I was like 300 and what is it, 3200, 340 bucks. I was pretty happy about that. It hit my number. So maybe my umbrella policy will pay off, you know. I don't know.

Bad Title Transfers And Hidden Traps

SPEAKER_01 28:43

I don't know how those two things came together. I'm gambling. I'm gambling. Yeah, I see. You're throwing money out the door, and sometimes you win, sometimes you lose. There you go.

SPEAKER_00 28:55

My story with insurance, that's for sure. Okay, now I got one more strategy that I do not recommend, and I've had clients do this, and they'll they've got home equity, and they'll put it in their spouse's name, the home. Um, or I had a grandma transfer the home into her son's name. Because she's like, I might go claim Medicaid, and and I drive crazy, and I want to protect my home equity, so I'm just gonna and my son's gonna inherit it anyway, so I'll just deed the home to my son. Well, she showed up in my office three years later with an IRS lien on her house and had no clue why. And when I asked her, Did your son have a problem with the IRS? She turned into a ghost. Actually, that didn't sound good. Grandma's pretty much a ghost. Grandma went white as a ghost, still present in my office. And and uh ended up having to pay the IRS lien. And so, and if I've had clients transfer homes into their spouse's name, and all of a sudden they're not as popular and they get served paperwork. And yeah, it's be careful transferring title.

SPEAKER_02 30:09

Yeah, I mean, just there's so many tax and legal issues. Gifting it to your kids is there's just like that's a gift tax issue, and are you gonna file an estate tax return recording the gift? If you don't, there's a there's a gift tax. It's like there's just like a lot of issues there. Plus, you're losing step up and basis when you die. It's just don't do that. That is just a no-no. Um, the the spouse one, I see that it's like physicians. That's the one I see that the most. Like if you're a surgeon or something, and you're just like, you know, that's like you're gonna have a medical malpractice case, it's just a matter of when. And so you're like, well, but I'll just put it in my spouse's name because they're gonna have to sue me. So I'll put it in my spouse's name. And I can see that motivation where you're trying to protect it. Um, I'd go through our other strategies first here. Your spouse, you don't have that liability issue, but you do have a is this marriage gonna work out? And how are we fighting over the assets later issue, maybe? And maybe that's could be more of a risk than the medical malpractice lawsuit. So treat carefully there if if um if that is your uh if that's a strategy. But I I could see an argument with the spouse strategy, but I do not see it for transfer it to one of your kids.

Reduce Liability With LLCs And Habits

SPEAKER_00 31:22

Definitely not. Totally, totally. We have a state planning that runs right in the face of that. Now, number seven, I think you're gonna go to don't be a dumbass school. Uh is that right? Yes. Finally, we get to go we get to go to this. Okay.

SPEAKER_01 31:36

Tell us what would be at school. What would we learn on day one of dumbass school, Matt?

SPEAKER_02 31:41

Well, day one of dumbass school would be um put your seat belt on, okay, and maybe get behind some type of barrier of protection if something bad is gonna come your way. Okay. So um, and what we're talking about here is where are your liabilities coming from? Like if I'm gonna get sued, and I'm just serious, like me, Matt Sornson, like if I'm gonna get sued, where is it most likely gonna be? Where they want to sue Matt Sorensen. It's probably gonna be from the moment I operate in businesses or one of my rental properties where I have tenants. That's the most likely plaintiff risk that I have. So, how do I protect my personal assets? Well, when I'm operating a business, directed IRA, KQS lawyers, mainstream business services, whatever company I own or have owned, I'm those customers aren't doing business with Matt Swanson, they're doing business with my LLC or my corporation. And I've got liability protection. A lawsuit happens in that business, they got to sue that company. Same thing with my rental properties. Matt Sorensen doesn't own that property. MNS real estate owns that property. That's the landlord. If there's a lawsuit, they slip and fall at that property. They can't sue me. They have to sue the LLC. So, what I've done is I've contained the liability at the business or asset level where I where I have risk. And that way all my personal assets are protected. They don't even get down to them. I don't even need to worry about the equity in my home because the greatest risk area I had, I put a barrier and protection in. And we can't stop you from being a dumbass, but we can help put a barrier in place so you don't bear the risk and burden of that, of those dumb mistakes.

SPEAKER_00 33:20

I I love it, Matt. And I freaking I'm gonna write an article on this, you know, go to dumbass school. And I this is so good. I I really want to emphasize this. This is all kidding aside. Number one, I I actually disagree with you. I do not think your most likely lawsuit is a rental property or your business. Do not text and drive, do not drink and drive. Drive the speed limit generally. You know how many car accidents are a day in this country? I mean, it is bad news, right? I'm caught, right?

SPEAKER_02 33:50

I know, yeah. That's true. I mean, that's like, I mean, the just if you just look up at the billboards flying by you every day, it's like I don't know accident. You've been caught in accident. Oh, we can sue you for this.

SPEAKER_00 34:00

Yeah. Number three, um, LLC for your rental properties and maintain the LLC. Yeah, I everything's I don't have to do minutes. Really? Are you kidding me? So at our company, Main Street Business Services, we have a company maintenance plan. 200 bucks a year. We take care of all those little pieces and parts to make sure your LLC is in good standing, it's up to date, all those things. Number four, I like your point. Business liability. You know what a business owners do? Man, I've done it, is a risk assessment plan. Do you have an employee handbook? Do you carry insurance in your business? Do you have proper procedures for hiring and firing? Do you la la la? You can get a lawsuit from an employee faster than a customer. And so having a business assessment risk plan, I think is critical. And I'm gonna throw number five out here. You might have a couple others. Is when your kids are under age 18 and driving a car and your name is on title of that car, buckle up. You, your assets are at risk when your kids are driving your car. Period. When your kid turns 18, give him the car. Buy him a different car, give them a jalopy. Get your name off title. And I know everybody, there's all these laws of, oh, keep your kids on insurance until they're 26. Oh, you can keep your kids on insurance until this age. Are you crazy? I don't want them on my beginning. So when your kids turn 18, they're an adult. Let's sever the liability that you've been carrying since they were zero and get them off your books.

SPEAKER_02 35:34

I mean, just it's so funny. I'm actually going through the process of that right now with my uh one of my adult kids. So, which I've been having to get the title out of my name, which has been a pain in the butt. Um, the the motor vehicle administration here will only mail you a title. Like, I'm like, and it's been four weeks, so I was literally at the MBA yesterday. Um, because I'm actually doing this right now, is like there's no reason this should be in my name anymore. Um, and uh and if that's the primary car they're driving, anyways, get it to them. And if you're like, well, but but let's say you've got the 18-year-old that's still in high school, even, or they're you know, they're like, I don't know, they're like not financially responsible. They could go sell that car tomorrow and have all the cash. But you can still put a lien on it if you want it. You can have you can be the lien holder on it, which you that you'd have to sign off on the transfer of title to. So they can own it, and you're the lien holder still. Um, if you want to still have a little control if you're worried about your kid, you know, selling that car and trying to cash out on it.

Kids Driving Liability And Final CTA

SPEAKER_00 36:32

Yeah. You know, it's funny. Um I I we could continue, but we this show has been phenomenal. I've loved it. But I'd like to almost get on Grock and Chat GBT, and I may do it as soon as this show's over, and go, what are the top 20 lawsuits an American might face? Let's start there. Let's just try to limit the chance of one of these 20 lawsuits happening, and that's Matt's point number seven, which I think is phenomenal. But we also have to take precautionary measures and these other five or six strategies to protect the equity in your home. I hope one of these landed for you, it can work for you. And I beg of you, please call the law firm, get a asset protection and privacy consult. It's under two grand. We're gonna go through all of your assets, build you a trifecta, identify where your exposure is, what you could be doing better, and give you a list. And you can up, you can implement it with us, without us, at your own pace, but at least you're gonna know where you're exposed based on where you live and what your risks are and what your assets are.

SPEAKER_02 37:34

Yeah, so the link's in the description on below. KQS Lawyers is our law firm. We have clients helping clients across the country. Asset protection, privacy, tax, we're here for you to be a resource. And we know what it's like to go and build all these assets and the and the the feeling of um uncertainty and am I at risk? We want to take that out of your head. That's what this plan is about. Understand the things that you can do to protect yourself so you can take that worry out of your head, focus on growing and building wealth, and living the life you want to. Uh, let us help you get there. KKOSlayers.com description and link below. Thanks everyone for listening for today's Mainstream Business Podcast. Make sure you're subscribed, you're liking it, you're sharing it with your friends or family. Um we'll be back, of course, next week with another amazing episode. See you then.

SPEAKER_00 38:21

Yeah, thanks everyone. Don't be a dumbass.