Own nothing and control everything. Sounds pretty good, right?
Greedy tax collectors can't come knocking on your door looking to collect if you have no wealth to your name. Is it possible to implement such a strategy? Is this legal? In response to both prior questions, yes. If you have an LLC (Limited Liability Company) under your name, you won't be able to have your cash and assets under your LLC be held up in legal cases made against you. It's an extra level of peace of mind for you if something like that (hopefully doesn't) happen.
Domestic Asset Protection Trust (DAPT) & Private Trust Company (PTC) is how the rich (and yourself with Lightbeam 💪) will be absolved from having to pay wealth taxes. The origins of trust laws can be traced back to the 12th century and have been effectively leveraged since their inception. Alaska was the first state to allow Asset Protection Trusts as part of its move towards a "new age" of trust laws. Countless individuals have taken advantage of the unique advantages provided by DAPTs for over twenty years. Historically, society's most affluent have employed these sophisticated legal constructs for asset protection, tax planning, and estate planning up until now.
How it works:
There are three discrete entities involved in the process of forming a DAPT:
- Grantor - The person, like yourself, who is creating the Trust.
- Trustee - In our case, a Private Trust Company in which you are a manager of. A PTC can be thought of as a superset of a limited liability company (LLC). The LLC will be managed by yourself, and you'll sit on the "Investment Committee" and "Distribution Committee" giving you the power to use the cash and other assets of the Trust at your discretion. Examples include: a) If you want to invest in Bitcoin, you simply invest the idle cash of the DAPT to acquire the cryptocurrency, b) if you want to write yourself a check for a luxury vacation, you can do that too.
- Beneficiary(ies) - Benefit financially from Trust assets, will typically be yourself, you'll want to list secondary beneficiaries (ie. spouse, children, relatives), listing tertiary beneficiaries (ie. grandchildren) is also a good idea.
A Domestic Asset Protection Trust (or Self-Settled Spendthrift Trust) allows you to split "legal" and "equitable" title of your assets. This means that you're able to protect your assets & lower the tax liabilities incurred by those respective assets without losing control of them. You, as the creator (commonly referred to as the settlor, or grantor) of the DAPT can also be the primary beneficiary (you benefit financially). One of the first steps taken in establishing a DAPT starts with the transferring or re-titling of assets to the DAPT. To expand, ownership of assets are being transferred out of the grantor's name and into the DAPT. In the eyes of the law, you would no longer be considered the rightful owner of the property — the DAPT now has sole ownership rights. The DAPT is considered a separate entity with its own Federal Tax ID, or Employer Identification Number (EIN).
In essence, would you've done is lower your personal net worth (wealth) equal to the fair market value of the assets you've re-titled. **They can't tax you for wealth that isn't yours!**
Since a DAPT allows the grantor to be the primary beneficiary you'll still be able to reap the financial rewards from the assets even after they've been transferred into the DAPT. You remain in control of the assets in the Trust and have sole discretion as to how those financial resources are used. Ranging from investing in the stock market, bonds, crypto, rental properties, etc. to controlling distributions to yourself to cover your daily living expenses or booking a luxury vacation.
You can hire an attorney on retainer for ≥$7,500 and pay additional annual fees for updating and tweaking your trust for around ≥$9,000 annually.
You can use Lightbeam for a 1/5th of that annual price! All of the forms and templates provided to get you managing your assets like the wealthy have been reviewed by the same attorneys specializing in Trust laws and asset protection. Only difference is that you didn't have to pay thousands of dollars. No need to wonder who has the last laugh 😃
He heads Engineering at Lightbeam; formerly a Senior Engineer at McKinsey Cloud and lives in the Bay Area.