How to Protect Your Assets Like a Trump
[Editor’s note: The following is meant for informational purposes and is not legal advice. For information pertaining to your specific legal situation, please be sure to consult your attorney.]
The biggest debates in 2017 thus far have been bred from questions surrounding some of the controversial statements and decisions made by the new President of the United States, Donald J. Trump. There are many citizens who want to know whether or not the President has been illegally working with the Russian super power or what unethical dealings may be revealed if his tax returns are subpoenaed by the courts.
And while the media may make it sound as if these are the only questions lingering, there are another set of questions that people have been asking which aren’t related to the President's Political life. There is one question in particular that really made me begin to wonder. How does Donald J. Trump protect his assets?
Protecting the Trump Empire
It’s well known that President Trump is a hard core believer in prenuptual agreements. In addition, much of his celebrity revolves around that fact he has also survived a number of corporate bankruptcies and lawsuits. In fact, it would seem that he’s come out of it remarkably unscathed.
So how did he do it? How has Donald Trump been able to protect his wealth? Well, the smart money would say that he hires smart attorneys to set up his asset protection strategies. But to be more specific, he holds the bulk of his wealth in property and he protects his property with Corporations, LLCs, and Trusts. What this means is, Donald Trump protects his assets by not having them in his own name. What many people don’t know is that you don’t have to be rich to use these same strategies.
Before getting into how this can help you, let's talk about President Trump’s wealth. According to Forbes, as of February 2017, Donald Trump’s Net Worth is $3.5 Billion. Only a small portion is held in cash or personal assets. The rest is held in business and real estate holdings. Forbes shows the following breakdown.
- $270 Million in Personal Assets
- $230 Million in Brand Businesses
- $620 Million in Golf Clubs & Resorts
- $630 Million in Non-New York Real Estate
- $1.7 Billion in New York Real Estate
Donald Trump's financial disclosure shows his property divided between 515 entities, limiting his risk of liability to the equity he holds within these entities.
Own Your Own Corporation
Have you ever asked yourself why the rich own their own corporations and everyone else works for them?
When you own a corporation your company exists as a separate entity. What this means is that your company is like a person, separate from the owner like a proxy or fictional person but the owner pulls the strings or makes the company’s decisions. When you keep your assets in separate entities, that exposure to risks such as a lawsuit or bankruptcy is limited only the to affected entity. Your personal assets, and your other companies will go unharmed.
C-Corps, S-Corps, LLC’s & Trusts
There are 4 types of entities that provide some of these protections and they are C Corporations, S Corporations, Limited Liability Corporations, and Trusts. Entities that leave you completely exposed to risk are sole proprietorships and partnerships. That doesn’t mean you should never own a sole proprietorship or a partnership. Laws very from state to state and change over time so you should always consult with an attorney before making these types of decisions.
For maximum protection, you may incorporate with an LLC then choose to be taxed as a C-Corp when it’s most beneficial or an S-Corp when it most beneficial. Keeping your property safe from lawsuits alone is well worth the cost of incorporating. So the fact that owning a corporation comes with tax advantages is like having your cake and eating it too. This is where trusts may become a vital part of your protection and privacy strategies.
Trusts were first created because in the olden days, property owners were obligated to fight in the king's army so some property owners would put their property in another person's name to avoid that obligation. Today, trust can be used to avoid liability and to avoid giving up your property if a judgment is handed down against you. If it’s not in your name, you can’t be sued for it.
Protection Isn’t Just for the Rich
Some people have the notion that Estate Planning attorneys, Corporate Attorneys, Bankruptcy Attorneys, Residential Real Estate Attorneys, and Intellectual Property Attorneys are reserved for the ultra rich. This couldn’t be further from the truth. Whether you’re looking to do owner finance (seller finance) or deeds without warranty, you will find that the price of protection is much lower than the cost of taking risks without these protections. If you own a home, invest in real estate, or own a small business, knowing how to keep your assets safe from frivolous lawsuits and excessive taxes may be the most import lessons you will ever learn.
This article was meant for informational purposes and is not legal advice. If you are interested in learning the Art of the Deal, buy Donald Trump’s book. But if you need assistance with the Art of Asset Protection, contact a qualified Real Estate Attorney.