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Sometimes Things Aren't What You Expect Them To Be

By Rob Lambert - Email Editor

Date : Oct 05, 2006

Several years ago, Kelli and I were relaxing in a beautiful lounge at one of our favorite hotels. The manager had just given her a beautiful yellow rose, and she took a huge whiff of the beautiful little thing. In mid-whiff, in walked a huge black man. (He was so big he made me look small, so I naturally liked him a lot.) He was dressed in a black suit with two body guards. He noticed Kelli enjoying the rose like it was the only one she had ever smelled.

He sat down about 10 feet away, and in a huge voice with an English accent, he asked Kelli if he might partake of her rose and have a word with her. She said “sure,” and sat down with him. He took a giant whiff of the rose, and the conversation began.

Two hours later they were still head to head solving the world’s problems. It was finally time for him to be making his way out of this magic place, and the conversation came to an end.

After he left, Kelli sat down with me, and said that she had just spent time with one of the most cultured and wonderful men she had ever met. They talked about things like they were long lost friends and came close to determining the meaning of life. She had not asked him his name, as is the tradition in this lounge.

My comment to her was, “Honey, you just spent over two hours with Idi Amin, one of the greatest mass murders to ever live.” I mentioned to her that he certainly murdered close to 500,000 people, and actually ate the parents of one of my clients.

She still has trouble with this. He, like all people and things, usually has several sides to himself, as there is usually more to any person than meets the eye. A mass murderer one day; a charming gentleman mystic the next. This still blows her (and my) mind.

Well, you are probably asking what does this have to do with Asset Protection? Plenty. Most trusts have two sides: One inhospitable side for creditors, and one hospitable side for the client. Let me explain.

First, is the inhospitable side for the creditors. What the creditor normally sees is a foreign trust sitused in some country with laws which do not favor him. The creditor and his lawyers are frying their brains trying to figure out where, and indeed how, to sue to even have a chance to possibly get to the protected assets. They are faced with a myriad of difficult and perhaps insurmountable obstacles such as: How to pick, retain and pay a suitable lawyer in an inhospitable jurisdiction to potentially enforce a U.S. judgment, which is very unlikely to be recognized. If they are successful with this hurdle, then they have to face the issue of actually finding and getting the dough (which is probably in a different country). These are difficult problems at best for the creditors. Kind of like the mass murderer side of Dr. Amin. Nothing but ugly choices.

Second, is the hospitable side for the protected client. A properly structured Kinetic Asset Protection Trust is most probably treated as a domestic trust for income tax purposes. This means that there are usually no additional tax filing requirements (provided the trust remains domestic, which is determined on a year to year basis). In addition to being a domestic trust, it is normally structured to also be a grantor trust. How is this done? Simple: As long as the settlor of the trust retains the power to change beneficiaries at any time, the trust will be a grantor trust. The important impact of this classification as a grantor trust is that the trust is for all intents and purposes treated as the alter ego of the settlor for income tax purposes. No special tax returns are required. In fact, the trust will normally use the settlor’s social security number and will not even have its own EIN. In short, it is simple and doesn’t impose huge burdens on the protected settlor. This is like the cultured and charming side of Dr. Amin.

So, like with Idi Amin, whether you like him or hate him depends on which side of the fence you are on. If you are protected, you will most certainly love your trust; if you are a debtor, you will most certainly hate the trust.

By the way, in writing this letter, I checked Dr. Amin’s history and indeed watched the recent wonderful movie about Dr. Amin called the Last King of Scotland. I suggest you see it. One very interesting fact I discovered is that he bestowed on himself the following title: His Excellency President for Life Field Marshal Al Hadji Dr. Idi Amin, VC, DSO, MC, King of Scotland, Lord of All the Beasts of the Earth and Fishes of the Sea and Conqueror of the British Empire in Africa in General and Uganda in Particular.

Yep, he sure was a little arrogant. (No hate mail please; this is an understatement!)…but, unlike Asset Protection Trusts, he had no redeeming social purpose at all.

Have a healthy and protected week.

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