Lesson #2 Building Your Fresh Start Trust By Richard Geller Calworth Glenford, LLC dba www.financialsuccessinstitute.org
Disclaimer this limits our liability Read it! In plain English, I did my best to make this the best guide I could make it, for someone wanting to help others facing foreclosure, credit problems, financial difficulties, or just wanting to maximize protection of their assets. But I am sure that I left stuff out, forgot some important stuff, and made some mistakes. Plus, I can t know the laws of your state, and the facts in your particular situation. And I m not a lawyer nor do I play one on television. Some of this stuff MAY NOT WORK. Or it may be ILLEGAL. Who knows. So You have to take responsibility for whatever you do or don t do after going through my home study ecourse. Don t blame me!! I am not responsible for what you do!! If I were you, I d find a good attorney to advise me. And I d check out whatever it is that anyone tells you to do me, the attorney, your mother-in-law, whoever. Then I d take my chances. Life is full of risks. You could do great following my advice. Or you could fall on your face. Who knows, maybe some of the stuff I suggest is illegal in your state. I don t know. But regardless, you can t go after me for telling you to do something or not do it because I am right now disclaiming any liability. You are on your own!! And with that out of the way, read on While the publisher and author have used their best efforts in preparing this ecourse, they make no representations or warranties with respect to the accuracy or completeness of the contents of this ecourse and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial
damages, including but not limited to special, incidental, consequential or other damages. And another important note this one about ethics The techniques I outline in this ecourse some of them anyway may strike you as pretty outrageous. Unethical perhaps. You may find a few techniques that you can swear are illegal. I don t advocate anything illegal. And I don t want you to do anything unethical. These techniques exist. People do them all the time. I don t want you do be at a disadvantage by not knowing them. So I tell you about them, no holds barred. I think it s too easy to judge others when you haven t been in their shoes. Some people are in frightful situations and they are frankly quite desperate. They need answers. I hope, if this is you or your clients circumstance, you find answers, some of them here. That doesn t mean I think you ought to do things that are unethical, or that things you choose to do are right for everyone. That is for you to decide. Okay? And a final important note this one about plagiarism! You DO NOT have permission to resell this information. You DO NOT have permission to give it away to someone else. This information is sold under a license that lets you read it, use it FOR YOUR OWN USE, but not give it away, make copies, sell it or resell it. For another copy, contact me at: www.financialsuccessinstitute.org Thank you!
IT IS STRONGLY RECOMMENDED THAT YOU PRINT THIS OUT PRIOR TO READING In the first lesson, you learned about the key components of trusts and specifically what an asset protection trust is about. You learned that it requires an irrevocable trust to protect your assets. There are many trusts out there that claim to protect your assets. The problem is most, if not all, have fatal flaws in the way they are structure. And others recommend that you establish your trust off shore. Do you really want to place your wealth in a bank in a country with an unstable government? You may or may not get it back in a few years when you are ready to start distributions from your trust. With the Fresh Start Trust, you don't need to be concerned with flaws in the structure of the trust or that it is being created overseas. What this course does is show you what the very wealthy have been doing for centuries to protect their assets from creditors and greedy lawsuit piranhas. Here at Fresh Start Trust, we don't even ask you to take our word on the subject. We recommend that you work with a qualified and competent attorney that specializes in Trusts. Our recommendation is 4
for you to take what you learn here and sit down with a trusted attorney and have them verify the Fresh Start Trust structure will do exactly what you have been told it will do. State trust laws vary so this is a good idea to make sure your state law agrees with the principles you are learning here. However, if you would like, we can help you setup your Fresh Start Trust. Contact us at: support@getrapidhelp.com This lesson delivers very important information. You are about to learn the mechanics of putting your Fresh Start Trust together... In this second lesson, we re going to talk about: exactly how to structure a Fresh Start Trust. While all of the lessons are important, this one is the most important. Be sure to study it carefully. The Fresh Start Trust is specifically designed to start a new business inside the trust for asset protection. It is not structured to transfer an existing business into it. There are ways to go about that but the Fresh Start Trust is not best suited for that purpose. When you properly structure your Fresh Start Trust, you will be able to minimize or even eliminate the money and assets that old creditors can get at. The strategy here is keeping your most valuable asset, your business, inside the Fresh Start Trust until your financial troubles pass. 5
How long that will be depends on your individual circumstances and the state that you live in. It might be only until the creditor realizes they cannot get at your business or it might be until the statute of limitations passes on when they can attempt to collect on the debt. In this lesson you'll learn about that. Once your financial troubles are over, you can begin taking distributions from the trust and again live the life you deserve. By the end of this second lesson on Fresh Start Trusts, you will have the tools and knowledge you need to take the action step of setting up your very own Fresh Start Trust. After this lesson, you'll completely understand how to go about it step-by-step. Specifically, you ll have the following things in place Understanding the critically important roles in the Fresh Start Trust played by the grantor and trustees - you can't build it without doing it this way. Why two trustees are better than one for your Fresh Start Trust. How keeping you separate from the business and trust enables you to keep more money rather than give it to old creditors. What you need to know to calculate the right salary to draw from the business owned by the trust. 6
An understanding of the debt collection statute of limitations in your state. The action steps you need to take to establish retirement benefits and medical insurance, paid by the business but for the benefit of you and your family. This is one action packed lesson. Let's jump right into it... Building Your Fresh Start Trust Hello, Richard here again to show you step-by-step how to structure and build your Fresh Start Trust. First, I want to remind you that the Fresh Start Trust is specifically designed for you to have an operating business protected inside the trust. That way, if creditors or a lawsuit come after you, they can't get at your most valuable asset - your livelihood. You can't be put in jail for not paying old bills that you can't afford or don't think you owe. But a judgment creditor can come after what you own to repay the debt after they win in court. So, as you already know, if you don't own it, they can't get at it - even if you have full control of the asset. That's the secret and power behind the Fresh Start Trust. And keep in mind, this trust structure is specifically designed to build a NEW business inside the trust. It's a low cost method of building and protecting your wealth. 7
There are other asset protection structures that can move an existing business into an asset protection trust. However, it can be an expensive way to go once the operating business has real value. Also, if you already have creditors breathing down your neck, it might be too late to move an operating business into a trust. One of the beauties of starting a new business inside the trust is that it is protected from creditors right from the beginning. Even if those creditors are breathing down your neck right now, they can't get at a new business that is started inside a Fresh Start Trust. I'm thinking that's good news to you. A Brief Review I'll keep this very short but I think a quick review of lesson 1 is appropriate before we get into this lesson's details. In lesson 1 we discussed the main components of a trust. They are: The Grantor The Trustee The Beneficiary The Trust Subject Matter Roles the Key Components Play in a Fresh Start Trust All of the components in a trust are important. However, how these roles are assigned and what they do is what makes the Fresh Start Trust a great asset protection trust. As you already know, the trust 8
must be irrevocable. Once it owns your assets, it will always be that way - no going back. The role of the grantor is one of the most important to the concept of asset protection. You cannot be the grantor. If it appears you set up the trust for your own benefit and to keep creditors away form your assets, a court will most likely dissolve the trust and give creditors the assets inside. The best structure is to have someone close to you as the trust grantor. Someone that has a strong interest in your welfare. A parent makes the best candidate. A court will clearly understand why a parent wants to assure their child's well being by establishing an irrevocable trust. Especially, if you have had recent financial troubles. These could include a bankruptcy, a divorce, a business failure, or a foreclosure, the list goes on and on. After a financial catastrophe, a parent is likely to want to help you get a fresh start but they are also likely to be concerned whether you can manage the assets properly since you just had big financial problems. That's why a court will understand why they put the assets in a trust rather than hand them directly over to you. Now, a sister or brother or aunt or uncle or long-time family friend will work well as the grantor also. I just want you to know that a parent often works best in this role. 9
Got that? The grantor must be someone other than you and they must genuinely care about you. That is very important in creating asset protection. The role of the trustee is also important. In the Fresh Start Trust, there are two trustees. One of them is you and the other a competent adult selected either by you, the grantor, or together jointly. The two trustees have two distinctive roles in a Fresh Start Trust. Your role as a trustee is to invest the assets. This means setting up your new business inside the trust and managing it. It also means managing the profits the business makes and pays to the trust. Or it can mean you pour the profits back into the business to make it grow. Eventually you will want to pay the business profits to the trust either to invest or to be distributed. Distributing the profits and any other assets from the trust is the role of the second trustee. He or she will carefully follow the instructions in the trust documents created by the grantor. Having someone other than you distribute the assets adds another layer of asset protection. Since you are going to be at least one of the beneficiaries of the trust, this removes any appearance of a conflict of interest between you as a trustee and you as a beneficiary. It also strengthens the asset protection if a creditor demands to be paid from the trust. Instead of you (as the beneficiary and subject of the creditor collection) being the one to deny the creditor has a 10
right to the assets, it is a third party that does. A person that does not financially benefit from the trust. Of course, one of your roles is as the beneficiary. It can be only you or you can include others that you want to take care of. It can be your spouse, children, grandchildren, godchildren, whomever you chose to benefit when the distributions begin. If you include your spouse, remember it's an irrevocable trust. It cannot be changed once it is established. In view of the high rate of divorce in society, you might want to find another, less permanent, way to take care of your spouse. There you have it, the unique roles of the primary individuals needed to establish the Fresh Start Trust. Next, let's take a look at what else goes into structuring this powerful asset protection trust. Linking You, the Trust, and the Business You will be working for the business established inside the trust. It doesn't really matter what business you are in. If you already have a job, maybe your boss or the owner will allow you to quit and will hire you back as a contractor through the business you are setting up in the trust. That might be a real possibility if you are facing a salary garnishment. Your boss' business isn't likely to want be involved with your financial and legal issues. Also, your boss' business will no longer be responsible for your benefits. Those will now come from the business inside the trust. 11
Here is a graphic of how the arrangement works. The business is shown as a limited liability company (LLC) here. If you prefer, you can set it up as a corporation. The next lesson explores how you go about setting up the business. As you see, you are separate from both the Fresh Start Trust and the business. You are an employee of the business but you don't own it. You receive a paycheck and benefits as an employee. As the investment trustee of your Fresh Start Trust, you manage the business. That means doing things such as setting policy, determining how much vacation can be taken, and what the sick leave policy is. It also means determining what other benefits, you as an employee will receive. 12
Avoid Fraudulent Conveyance The one great thing about the Fresh Start Trust is that there can be no fraudulent conveyance of assets. Since you originally create your new business within the Fresh Start Trust, there is no conveyance at all. It simply makes good sense to protect an asset from the very beginning. You might be asking yourself what fraudulent conveyance is. It's about changing ownership of assets at less than fair value or moving assets with the intention of denying a creditor access to them. Here are examples of fraudulent conveyance. It's fraudulent conveyance for you to transfer ownership of your apartment building from your corporation to a Trust for $1,000 when you have $225,000 of equity and the market values is $450,000. It's also fraudulent conveyance if you have pledged an asset as security to a creditor and transfer it to a trust or another person or another entity without their knowledge and permission. This type of fraudulent conveyance occurs most often when someone is facing bankruptcy, a divorce, or other financial difficulty. Another time people try this is when the IRS is attempting to collect unpaid taxes. In an effort to retain assets, a person might transfer assets to family or friends. This is also known as "parking assets". It's a white collar crime with dire consequences. A person convicted of bankruptcy fraud faces up to five years in prison. Don't do it! 13
You avoid fraudulent conveyance when you start your new business inside a Fresh Start Trust from the very beginning. Setting Your Salary - You Need to Know About Garnishment A primary objective of the Fresh Start Trust is protecting the business profits from judgment creditors. Obviously, your paycheck is important to the Fresh Start Trust structure. When you decide how much to pay yourself, you need to take into account wage garnishment laws in your state. A court ordered wage garnishment is often the last method a creditor has available to attempt collecting an unpaid debt. Many will not resort to this but others will. You never know. Knowing federal and state law is important if you think your wages might be garnished. While the Fresh Start Trust will protect your business and the profits that you leave inside, the trust cannot protect the wages or salary you receive from the business. Remember you and the business are separate entities. The primary purpose of the Fresh Start Trust is protecting assets by allowing you to control them without owning them. By doing that, the assets inside the trust are protected until you work out your financial problems. After that, you can begin distributing assets from the trust to yourself. Federal law allows garnishment of up to 25% of your disposable income each week. The other 75% is exempt from garnishment (up 14
to a certain point). This applies to wages up to 30 Xs the federal minimum wage. Currently the federal minimum wage is $7.25 per hour. That comes to (30 X 7.25) $217.5 per week. For a 40 hour week, we are talking about a wage of $290. The amount above $217.50 can be garnished. If you don't want anything to be garnished, you are going to need to get by on $217.50 or less each week. Any wage below that level cannot be garnished. Federal laws says that when state and federal law do not agree, the lower amount of the two will be garnished. Beside federal law, you need to consider your state laws regarding wage garnishment. State laws very significantly. Generally, state law is more lenient than the federal law. In some states, the percentage of your wage that can be garnished may be more for child support payments than for other forms of credit or debt. A separate file comes with this lesson that shows the wage garnishment laws in each state. Use it as a reference only. State laws change frequently. At the federal level, the amount of pay subject to garnishment is based on your "disposable earnings," which is the amount left after legally required deductions are made. Examples of deductions include federal, state, and local taxes, your share of State Unemployment Insurance and Social Security. It also includes withholdings for retirement accounts as required by law. 15
Deductions not required by law include voluntary wage assignments, union dues, health and life insurance, contributions to charitable causes, purchases of savings bonds, retirement plan contributions (except those required by law) and payments to employers for payroll advances or purchases of merchandise. The law sets the maximum amount that may be garnished in any workweek or pay period, regardless of the number of garnishment orders received by the employer. For ordinary garnishments (i.e., those not for child support, bankruptcy, or any state or federal tax), the weekly amount may not exceed the lesser of two figures: 25 percent of your disposable earnings, or the amount by which your disposable earnings are greater than 30 times the federal minimum wage. For illustration, if the pay period is weekly and disposable earnings are $217.50 ($7.25 30) or less, there can be no garnishment. If disposable earnings are more than $217.50 but less than $290.00 ($7.25 40), the amount above $217.50 can be garnished. A maximum of 25 percent can be garnished, if disposable income earnings are $290.00 or more. When pay periods cover more than one week, multiples of the weekly restrictions must be used to calculate the maximum amounts that may be garnished. This table illustrates how federal laws apply to wage garnishment. 16
In addition to the wage garnishment state law document that comes with this lesson, there is a Department of Labor Fact Sheet included that answers more of your questions about wage garnishment at the federal level. Debt Statute of Limitations Finally, some good news. There is statute of limitations controlling how long a creditor can pursue collecting old debt. Here again, on size does not fit all. State law applies to debt collection statute of limitations. Generally, debt is categorized into these four categories: Open accounts (most credit cards) Written contracts (wide variety) Oral agreements (what you promised) Promissory notes (mortgages) 17
There is a separate document showing the debt collection statute of limitations for each state. Use it for a reference but make sure you know the current law before making any decisions that will affect you now and in the future. Benefits By setting up a Fresh Start Trust, you are able to continue having important benefits. Two main benefits you want to include in your LLC or corporate policy are a 401K retirement plan and Health Insurance. As your retirement plan, you want to set up a 401K rather than a different type of plan such as an Individual Retirement Plan (IRA). The reason being is that a 401K adds another layer of asset protection to your already secure Fresh Start Trust. Federal law protects your 401k from being attached in a bankruptcy. However, you again need to understand your state law in this regard. 401k plans also offer a lot of other benefits that don't come with other retirement plans. One is the ability to take out a loan of up to $50,000 ($100,000 if a spouse also takes out a loan). The amount that can be contributed annually to a 401k is much higher as well. As an employee, you are allowed to tax defer up to $16,500 each year into a 401K plan. If you are over the age 50, you are allowed an additional catch-up contribution of $5,500. Your business can add another 6% of your salary. 18
Another benefit you want to arrange to be paid by your new employer (since you are in control) is health insurance. There are a wide variety of plans available to small businesses. You can select from anything that pays 100% of medical costs to plans that only cover major emergencies and catastrophes. Not having medical insurance is not the place to cut financial corners. You'll likely being taking home a smaller salary until your financial problems are solved. One thing you can do to help yourself is have your business take out a good medical insurance policy on you and your family. Sad to say but more than 60% of bankruptcies in this country are the result of not being able to pay medical bills. Sometimes it can be difficult finding individual medical insurance. Especially if you have a pre-existing condition. If this happens to you, there are two options you want to explore. First, you can look at group insurance for small businesses. Most of the big insurance carriers offer to pool small businesses together in a manner similar to the way large corporations pool the medical insurance for all of their employees. The idea being that risk is shared across a broad section of people and it lowers the overall cost. Your other option is again based on the state that you live in. About 35 states offer health insurance high-risk pools for people who have been denied coverage by private insurance companies. There You Have it. The Fresh Start Trust Structure as the Best Asset Protection You Can Create! 19
Your Assignment for This Module Read and familiarize yourself with the additional materials provided with this module. There is important information in those documents that you will want to know before starting your own business. Take action to find medical insurance that the business can provide to you and your family beginning day one. Talk to a good financial advisor about setting up a 401k retirement plan that benefits you and adds another layer of asset protection. Either contact us here at Financial Success Institute or find a qualified attorney to begin setting up your Fresh Start Trust today. Send any questions or comments about the material to: support@getrapidhelp.com Keep your eye on your inbox, because you won t want to miss the eye-opening tips, tricks and secrets coming your way soon! Richard Geller Publisher, Fresh Start Trust P.S. Be sure to review all of the materials that are included with this curriculum package. You should have received four other files: 1. Fresh Start Trust Module 2 Checklist 2. Fresh Start Trust Module 2 Wage Garnishment by State 3. Fresh Start Trust Module 2 Department of Labor Fact Sheet on Wage Garnishment 4. Fresh Start Trust Module 2 Debt Statute of Limitations by State 20