This video discusses the importance of asset protection through entity structuring, particularly using LLCs, to shield personal assets from liability. It emphasizes that even if an individual has no assets currently, their future earnings are a valuable asset that needs protection. The video also highlights the importance of understanding insurance policies and their limitations, as well as the need to transfer titles to assets into the LLC to make the protection effective.

Highlights

• ️ Asset protection is crucial for everyone, even if you have no assets now. You may have future earnings that could be targeted.
• ⚖️ LLCs create a barrier between you and your assets, limiting liability in case of lawsuits.
•  Don’t forget to transfer the title of your assets into the LLC. Simply setting up the LLC isn’t enough.
•  Consider the number of assets you put in each LLC. Having multiple properties in one LLC could expose all of them to liability if one is sued.
•  LLCs are less effective in protecting your car from liability. The driver is still personally responsible.

TRANSCRIPT:

Here’s why the rich own nothing. And you should too. I’ll tell you.

I have a buddy that was in California, and he was driving down the road, taking his girlfriend and her two daughters to Disneyland. Unfortunately, he ran a red light and hit somebody right in the middle of the intersection. That was obviously bad.

What happens is the insurance policy kicks in. Most people buy insurance for their car only because they think they’ll need it to fix their own car. But in this case, the damages included personal injuries and the damage to the passengers. The insurance coverage was blown through quickly, and then all these other things started kicking in.

So the attorneys went after the individual because the insurance wasn’t enough. They went after his personal assets—his home, his investments, his car, and a rental property. Unfortunately, none of these assets were protected. That’s why the rich, when they buy assets—whether investments, vehicles, or properties—they structure ownership so they personally own nothing.

What should have happened is this individual shouldn’t have had anything in his personal name. Everything should’ve been in some kind of entity protected from creditors.

One person who helps me avoid these pitfalls is Mauricio, the legal advisor at KenMcElroy.com.

This is a scenario most people find themselves in. Insurance is always your first line of defense, but it’s not everything. A lot of people think they’re fine because they have insurance, but that may not be enough. If something catastrophic happens, your $500,000 or $1 million policy might not cover it. So you need to rely on entity structuring as a backup.

If Ken’s friend had entities in place, he would have been protected.

Another thing—people tend to shop for the cheapest insurance policy from salespeople who might not be aligned with your best interests. They often work for the insurance company, not for you. Many ads emphasize savings without discussing coverage. You might reduce your premium but also reduce your coverage.

Most people are driving around with minimal insurance and a false sense of security. They might think their umbrella policy or homeowner’s insurance will cover everything, but these often have exclusions. You must know where the holes are and make sure you plug them.

Once this accident happened, there was a judgment against Ken’s friend. The attorneys created a judgment for damages. Most people think of asset protection only in terms of someone suing their rental property. But the real threat is you—the individual. Driving, running a business, and interacting with others can all create liability.

So what happens if someone sues you personally? You need to create a barrier between yourself and your assets. That means putting your home, rentals, business, crypto, gold—anything valuable—into LLCs. That way, you don’t own the asset directly. You own the LLC, which owns the asset. This protects your assets under the law and increases your privacy.

Back when I worked for a plaintiff’s attorney, the first thing we’d do was an asset search. We’d only take on cases if we found something to go after—because we worked on contingency. If the defendant didn’t have anything in their name, we’d often settle for the insurance limits.

So how can the average person protect themselves? Even if you don’t have many assets yet, start by getting educated. There’s free info online, or you can buy books.

Always get insurance. It’s your first line of defense. But if you own a rental property, form an LLC in the state where the property is located and transfer the property’s title into it. Simply setting up the LLC isn’t enough—you must transfer the title, or the protection doesn’t apply.

This will protect you if someone slips and falls or if you’re involved in a lawsuit stemming from a car accident, like Ken’s friend.

We’ve had issues at our own rentals—fires, floods, injuries. If someone sues, they’ll sue the entity they’re paying rent to. If the property is in an LLC, only what’s inside the LLC—like a bank account or the equity—is exposed. Everything outside of that LLC, like other properties or personal accounts, should be protected.

People often ask how many rentals they should put in one LLC. Should they put one, ten, or create an LLC for each? The legal answer is: whatever is inside the LLC is exposed. So if you put ten properties in one LLC and something happens at one, the other nine are at risk. Many people put 2–3 properties in one for practical reasons—it costs money to maintain these entities.

During the 2008 crisis, I had clients with 30 properties all underwater. They were all held in one LLC. But since there was no equity, there was nothing to go after. It’s not just the number of properties—it’s the equity and cash that matter.

One note—putting your car in an LLC doesn’t really protect you from liability. If you’re driving it, you’re still personally responsible. The only time it makes sense is if the car itself is a valuable asset you want to shield in case you get sued personally.

Now, let’s say you don’t have any assets and you get in an accident with a judgment against you. A lot of people think, “No big deal, I don’t have anything.” But that’s a mistake. You have income. Even if you’re unemployed now, you’ll likely earn money in the future—and those judgments can last for 10 years and be renewed for another 10. Your future earnings are at risk.

Every time we buy something, we create an entity and roll the asset into it immediately. It never sits in our personal name.

One big mistake people make: they set up the LLC but forget to transfer title. You need to actually record the transfer with the county recorder so the LLC becomes the legal owner.

Mauricio has a new book about this. He talks about six layers of asset protection. We discussed the first few, but there are deeper layers depending on your situation. If you’re just starting out, your strategy will look different than if you’re a multi-millionaire with lots of assets.

We cover it all in the book. I’ve been in business for over 35 years, and I’ve just made the most comprehensive video on the most critical lessons I’ve learned in my career. I highly recommend you check that out.